A bargain sale is a simple agreement in which you sell property, such as real estate or some other valuable asset, to Benedictine Foundation for less than the property is worth.
Eligible property
It is possible to sell any sort of property to Benedictine Foundation for a bargain price. In addition to real estate, you can complete a bargain sale arrangement with collectibles such as artwork or antiques, other personal property, or securities. Please contact us about the property you are considering so that we can discuss whether we would be interested in acquiring the property for a bargain price.
Tax benefits
You will receive an income tax charitable deduction in the year of your gift. The amount of your deduction will equal the difference between the fair market value of the property you donate and your sale price. Your income tax savings will depend on if you itemize your deductions. (Note that if your bargain sale asset is tangible personal property, such as artwork or antiques, that Benedictine Foundation does not put to a use related to our exempt purpose, your deduction will be based on your cost basis rather than the fair market value of the property.)
You will also avoid capital gains tax on a portion of your capital gain in the gift property. For example, if you sell your property to us for one third of its fair market value, you will pay capital gains tax on just one third of your capital gain in the property. If the asset you sell to us is subject to debt, this debt will be added to your sales proceeds to determine your capital gains tax.
By removing your property from your estate, you may also reduce estate taxes and probate costs when your estate is settled.
Special considerations
If you are interested in selling us real estate or tangible personal property at a bargain price, you will need to establish the value of your property by obtaining a qualified independent appraisal.
To be valid for claiming your income tax charitable deduction, your appraisal must be conducted no more than 60 days before the bargain sale is completed and no later than the due date, including extensions, of the tax return for the year in which you make your gift.
If you are considering a gift of real estate, our organization requires the following additional steps before we accept your gift:
- We will need to examine your property and conduct our own analysis of its value. For example, we will want to know if there are any debts, taxes, or liens owed on your property.
- Once we accept your gift of real estate, we could become responsible for cleaning up any environmental problems your property may have. This sort of cleanup could be very expensive. Therefore, before we accept any gift of real estate, we routinely conduct a review to make sure the property has no environmental issues.
Phillip Spencer, a devoted supporter of Benedictine Foundation, owns vacant land in an area under rapid development that he purchased years ago for $15,000. The land was recently appraised at $250,000. Phillip would like to make a major contribution, but he is planning improvements to his home, and he needs about $50,000 to finance his project.
Phillip is thrilled to learn that a bargain sale arrangement will allow him to make the contribution he envisions and get the cash he needs to complete his home improvement project. He’s also pleased with his $200,000 income tax charitable deduction, which will create tax savings in the year of his gift that more than offset the capital gains tax he’ll need to pay. This example assumes Phillip is able to itemize his income tax charitable deduction.
| Facts |
|
| Value of land |
$250,000 |
| Cost of land |
$15,000 |
| Capital gain |
$235,000 |
| Sale price |
$50,000 |
| Benefits |
|
| Income tax deduction |
$200,000 |
| Capital gain to report |
$47,000 |
| Capital gain avoided |
$188,000 |
| |
|
| Income tax saved at 37% rate* |
$74,000 |
| Capital gain tax at 20% rate |
- $9,400 |
| Net tax savings |
$64,600 |
| |
|
| Cash to Phillip |
+ $50,000 |
| Total benefit to Phillip |
$114,600 |
*Assumes 37% rate and that Phillip itemizes his income tax charitable deductions.
