Bargain Sale

A bargain sale of property is treated as part gift and part sale. The charitable deduction for the gift portion equals the total value of the property, less the total amount of consideration paid by the charity, including any debt to which the property is subject.(1) If you specify that the bargain sale is subject to the reduction rules for ordinary income and short term capital gain property, the charitable deduction is calculated by reference to the cost basis allocated to the gift portion of the bargain sale.(2)

A bargain sale is a simple agreement in which the donor sells securities, real estate, tangible personal property, or other assets to a charity for less than their current value. The donor earns an income tax deduction for the difference between the fair market value of the donated assets and the sale price, subject to IRS 30%/50% limitations. If the donor bargain sells long-term appreciated property, the donor must report the capital gain that is attributable to the sale portion of the transaction.

A bargain sale is a simple agreement in which the donor sells securities, real estate, tangible personal property, or other assets to a charity for less than their current value. The charity pays the donor the sale price in installments according to a schedule the donor and charity agree on. The donor earns an income tax deduction for the difference between the fair market value of the donated assets and the present value of the installment payments, subject to IRS 30%/50% limitations.

A donor approaches your organization to gauge its interest in purchasing a building he owns next door. Your organization is interested, but cannot afford to pay market price for it. The donor is willing to consider making part of the transfer a charitable gift, but wants to receive some immediate financial benefit, too. What should you suggest?