Karl
Hendricks
was a man
with the
golden
touch.
Throughout
his life, it
seemed every
investment
idea that he
touched
turned to
gold. By
far, Karl
was most
successful
with real
estate
investments.
It was
definitely
his passion.
Amazingly,
Karl
continued to
buy and sell
real estate
at the age
of 85. For
instance,
about three
months ago,
Karl
discovered a
great
investment
property. It
was a
"fixer-upper"
commercial
building in
a great
area. While
other nearby
buildings
sold for
over $2
million, the
seller
needed to
sell quickly
and was
asking just
$1 million.
The
condition of
the building
turned many
buyers away.
It was being
sold
"as-is." But
Karl was not
deterred. He
could see
great
potential
with the
building and
knew it
would not
take much to
get it to
market
condition.
Therefore,
Karl swooped
in, bought
the building
for $1
million and
instantly
hired
contractors
to refurbish
the place.
After three
months of
hard work
refurbishing
the
building,
the place
looked like
new! In the
end, Karl
invested
$250,000 in
the building
bringing his
total
investment
in the
property to
$1.25
million. One
month after
the
completion
of the work,
Karl was
contacted
informally
by a company
that
expressed an
interest in
the building
- a $2
million
interest!
This was no
surprise to
Karl. He
knew the
building was
another
great buy.
After Karl
learned
about the
benefits of
a FLIP CRUT,
he eagerly
wanted to
move
forward.
(See Parts 1
and 2 for a
full
discussion
of this
decision.)
It looked
like the
perfect
solution.
However,
Karl did
still have
some
important
questions.
Question
After
learning
that an
appraisal
and IRS Form
8283 were
required,
Karl
wondered
what
reporting
requirements
were imposed
upon the
charitable
donee or CRT
trustee in
such a
situation.
Solution
When the
charitable
donee or CRT
trustee
signs a
donor's IRS
Form 8283
Part B, that
person
incurs an
obligation
to file Form
8282, if the
donated
property is
sold or
disposed of
within three
years. This
obligation
only applies
to property
where the
donee signed
the
appraisal
summary.
Thus, gifts
of property
where only
Form 8283
Part A is
completed
are not
subject to
this rule.
Because the
FLIP CRUT
trustee will
sign Form
8283 upon
receipt of
Karl's
building, he
or she is
subject to
the Form
8282 rules.
A
disposition
is defined
as the sale,
consumption
or gift of
the
"charitable
deduction
property."
There are
some
exceptions
to this
rule. For
instance,
Form 8282 is
not required
when the
donee uses
or consumes
the property
for its
exempt
cause. In
this case,
the FLIP
CRUT trustee
intends to
sell the
building
within three
years.
Therefore,
the sale of
the building
within three
years will
trigger a
Form 8282
filing. Form
8282 must be
filed within
125 days of
the sale of
the
property.
Form 8282
disclosures
include:
donor and
donee
personal
information,
date of gift
and date of
disposition,
description
of property
and amount
received by
donee upon
sale or
disposition.
The donee
must provide
the donor
with a copy
of Form
8282.
A failure to
file Form
8282 or
provide a
copy to the
donor may
subject the
charity to a
penalty.
Such
penalties
are as
follows:
Failure to
File
Penalty: $50
per return
Failure to
Give Provide
to Donor:
$50/per
return
Fraudulent
Identification
of Tangible
Personal
Property:
$10,000
Editor's
Note: In
Part 12 of
this case
study
series, we
address IRS
Form 8283.
