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GiftLaw Pro Home   >  Chapter 4 - Specific Property Gifts  >  4.7 Land and Buildings  >  4.7.2 Mortgage or Debt  >  Basic Quiz

Basic Quiz - 4.7.2 Mortgage or Debt

1. A gift of debt-encumbered property to a charity is a bargain sale.
           
2. When a donor transfers debt-encumbered property to a charity, the relief of indebtedness triggers gain to the extent that the debt exceeds the allocated basis.
           
3. Debt-encumbered property can be sold by the charity at any time without the charity's having to pay any taxes.
           
4. The "5 and 5" test states that debt-encumbered property given to a charity must have been held by the donor for at least five years and the mortgage must also be at least five years old.
           
5. If the "5 and 5" test has been met, the charity must sell the property as soon as possible to avoid the unrelated business income tax.
           
6. If the donor has not held the property for at least five years or the mortgage is not at least five years old, the charity will be unable to accept the property.
           
7. Even though the donor has to recognize income on the debt relief, it may be possible for the tax savings on the gift to charity to offset the taxable gain on the relief of indebtedness.
           
8. If the debt is against both the property and the owner personally, the debt is called non-recourse.
           
9. As the proportion of debt to value is lower, there will be greater charitable tax savings and less gain recognition.
           
10. When a donor transfers appreciated debt-encumbered property to charity, he or she may use the tax deduction up to 50% of adjusted gross income.