A donor can get an immediate income tax deduction by making a gift of a farm or residence while reserving the right to use and enjoy the property during his lifetime (and for the lifetime of a survivor, if desired).

When the life estate ends, the property will automatically pass to the Foundation, avoiding probate, and usually estate taxes as well.

A donor's vacation home or stock owned in a cooperative housing corporation will qualify for this deduction, even though the donor does not use the property as his principal residence. A gift of a farm may even be made with the life estate reserved for an individual other than the donor, if desired.

EXAMPLE: Sam Smith, age 67, and his wife Sarah, age 65, own a farm that has substantially appreciated in value over the years. Their grown children, successful in other vocations, are not interested in taking over the farm. But, if the Smiths sell the property, they face the prospect of paying a large capital gains tax.

The Smiths decide to give the farm to the Foundation and retain the right to live there and receive the income from it during their lives. Assuming the property is worth $320,000, the Smiths are entitled to an income tax deduction of approximately $68,000, which can be used to offset income on their annual tax return. Their gift enables them to avoid the capital gains tax on the property and removes the property from their probate estates. When the life estates terminate, the farm will be used by OSU in the name of Mr. and Mrs. Smith.

Note: A farm, residence or vacation home can also be given outright with no reservation of a life estate. This gift would yield a tax deduction equal to the property's fair market value.