Property donors need not give it all awayTHE HOUSING SCENE

WASHINGTON -- If there is a problem with owning real estate, it comes when it's time to get rid of it.

For starters, real estate is highly illiquid. While you can dispose of stocks and bonds within minutes by simply calling a broker, it takes time -- sometimes a long time to sell a house or other property.

Then there's the matter of obtaining top dollar, or even a fair price.

And when the need to sell is urgent, the chances of receiving market value are greatly reduced. Indeed, the faster sellers want to move, the less they'll usually take.

But these drawbacks can be overcome by giving your property away instead of selling it.

And there are a variety of ways real estate can be gifted without jeopardizing your family's financial security.

Maximum benefits can be realized by donating your property outright to a qualified charitable organization. Not only is there no taxable capital gain on a gift of appreciated real property, but the full fair-market value of the gift is deductible.

Even if you need to net some cash out of your house, a charitable donation may be in order. By selling a property to a charity at less than its appraised value you can deduct the difference as a gift and pay taxes only on the realized gain.

But there are several other ways to structure your real-estate gift that may not be as emotionally wrenching as simply signing away ownership after years of enjoyment and memories.

Take the case of the elderly couple that owns a condominium at the shore. Mom and Dad took the kids there every summer for years, but now the kids are grown and scattered across the country, so they don't use the place at all.

However, even though they don't get to the beach as often as they'd like, Mom and Dad still enjoy the condo on occasion. But a bigger, more pressing issue is that they need a tax deduction, a big tax deduction, and they need it this year.

One way to solve their dilemma is to make a retained-life-tenancy gift of the condo; that is, to donate the apartment to their alma mater while retaining the right of possession.

With retained-life-tenancy gifts, as with other charitable donations, the capital-gains tax on the property's appreciated value is avoided completely.

However, because you are retaining some rights to the property, the gift deduction is based on the fair market value reduced by the actuarial value of your right to continue using the property. But it can still be substantial.

Just as important, when a property is donated with a retained life tenancy, it is removed from its owner's estate. So when you and your spouse pass away, the property passes to the charity and is not subject to probate or estate tax.

Personal residences and farms are the only types of property from which a remainder interest can be transferred to a qualified charity in this manner. But you don't have to work the farm personally to obtain a deduction.

Another attractive real-estate-gifting option is to exchange your home for an annuity based on the full market value of the property.

Lew Sichelman has been covering real estate for more than 30 years. He is a regular contributor to numerous shelter magazines and housing and housing finance industry publications.