Tax Deduction via Bargain Sale


A bargain sale is the sale of land or other assets to a charity, land trust, or other non-profit for less than fair market value.  In general, the fair market value, less the sale price, can be deducted from your taxes as a charitable donation as long as the property has been held for at least one year by the landowner. In a single year, this deduction is limited to 30% of the donor’s adjusted gross income, but can be carried forward over five years. This can also result in a reduction in capital gains tax for the sale of the land. For the payment to the landowner for the land sell, the landowner can either receive a lump sum payment from the charity or receive payments over multiple years.

Getting Started:

  • Consult with your tax adviser before beginning this process.
  • The landowner should consider:
    • the advantages of a bargain sale to a charitable organization (i.e. preservation of ecologically significant land, tax benefits from sale of land at below market value, etc)
    • the potential disadvantages of a bargain sale to a charitable (loss of profit from sale of land, etc)
    • a charity may be interested in land that is not ecologically significant if the owner will allow it to be resold by the charity in order to purchase ecologically significant land elsewhere.
  • There are many nuances and further considerations in tax law to be considered before selling land to a charity or land trust. Please review the following IRS Publications for details on Federal tax law and bargain sales:
    • The IRS Publication 544: Sales and Other Dispositions of Assets For use in preparing 2014 Returns discusses Bargain Sales of Land on page 4
    • The IRS Publication 526: Charitable Contributions For use in preparing 2014 Returns discusses charitable deductions involving Bargain Sales of Land on page 13
  • The landowner should research and meet with land trusts to discuss further steps in the process. The selected land trust will guide and assist the landowner through the process.

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