Carmel design firm turns landscaping into tax breaks.
Thursday, June 3, 2010
Those apple trees, flowering plums and sugar bushes in your yard are adding more than foliage over the years; they’re gaining value, too. One local building design firm helps property owners reap the tax benefits of landscaping gifts.
Michael Batori of Carmel-based Michael Batori Associates says he came up with his trademarked Plant Rotation Donation System in the late 1970s. Several years later, a Southern California client was faced with an $8,500 quote for removing a grove of large banana trees. But for $10,000, Batori’s company dug them out, pruned them and moved them to a wild animal park, where the leaves made tasty elephant snacks.
The gift was valued at $170,000 – which translated to an $80,000 tax write-off that paid for the client’s new pool.
Traditionally, Batori says, property owners want their new landscaping to look complete, so they spend hundreds of dollars on big plants rather than waiting for cheaper seedlings to grow up. But a landscape dense with small plants can be just as lovely – and more lucrative. The math is simple: Plants appreciate over time, their values determined by increasing caliper-inches.
“We put in too many plants with a pre-designed thinning process,” Batori says. “You put it in at $15, and in four years it’s worth $350 to $400 wholesale. Then we move that plant to a park, a hospital, a church, a Ronald McDonald House, a zoo – then it becomes a gift of wholesale value.”
Batori’s firm designs the landscaping, coordinates gifting from private clients to nonprofit recipients, and works with certified public accountants on the tax documents. A properly designed quarter-acre lot can generate a gift of up to $50,000 in four years, he says.
Susan Turner, a Carmel-based CPA who does taxes for Batori, says the system involves some restrictions: The client must own the plants for more than one year, plants worth more than $5,000 must be independently appraised, the nonprofit recipient can’t resell them, and the total write-off can’t exceed 30 percent of the donor’s adjusted gross income.
But all told, she adds, the system works: “It’s little cost to the donor, and they get a tax break.”
You might call it a fruitful way to grow wealth.