A bargain sale takes place when a donor sells a property to a charitable organization and receives less than the fair market value in return.
Your good deed is a great deal:
- You sell CFGP your property for a price less than fair market value.
- You receive the cash from the sale and a charitable deduction for your gift to CFGP (the difference between the market value and purchase price).
- While you may owe some tax on the amount you receive from CFGP, the charitable deduction from your gift could offset your taxes this year.
Benefits of Charitable Bargain Sales:
- Avoid capital gains tax on your charitable gift
- The deduction from your gift will give you valuable tax savings that may reduce your tax bill this year
- With the cash received from the sale, you may then reinvest to create more income for your future
- Best of all, your gift will serve the charitable goals you care about most
What Information is Needed to Document a Bargain Sale? The landowner is required to demonstrate donative intent, specifically that the landowner will receive no special ‘quid pro quo’ (such as event tickets) for the charitable sale.
To help demonstrate donative intent, specific language should be put in the purchase and sales agreement. Example:
"BUYER acknowledges that SELLER intends to claim this sale as a bargain sale for charitable purposes and BUYER agrees to sign the property receipt acknowledgment on Form 8283 for the SELLER’s federal income tax return. BUYER makes no acknowledgment as to the amount of an deduction claimed by the SELLER”.
Learn more about the steps in thoughtful planning. The Catholic Foundation of Greater Philadelphia is established to be a tool for you to leave a lasting and secure legacy. Use our request for information form to learn more.