An IRS Section 170 Bargain Sale is the sale of a property to a charitable organization (501(c)3) for less than the fair market value as determined by a gift appraisal, not its quick sale price or listing price. Bargain sales are often used by sellers (donors) who believe the property has more value than the current offers are delivering; and wish to make a charitable donation that captures that future value while also receiving cash proceeds. Many types of commercial property and luxury homes have huge differences between the price of an immediate sale and the value possible with the ‘perfect’ buyer (like a user or a developer who can capture value repositioning the asset to its highest and best use).
With the COVID-19 induced recession, many sellers don’t want to take a short term price hit to liquidate an asset and a large ‘bid/ask’ spread has now hit the real estate markets slowing volume to record lows (per CoStar June 2020). The Bargain Sale is a great strategy to achieve a tax deduction for the discount required to sell today, often achieving the price the seller wants when adding the cash paid by the charity and the tax savings from the deduction on the ‘gift’ amount.
The ‘gift’ amount is the difference between the cash received at closing (less commissions) and the IRS MAI-designated appraisal value. See IRS Section 170 for additional information. Like the 1031 Exchange, the IRS Section 170 Bargain Sale was created by Congress (in 1917) and is overseen by the Internal Revenue Service. A Bargain Sale is an IRS approved transaction and differs from a 1031 Exchange in that the seller is not required to reinvest sale proceeds.
Charity Auction Network and Zetabid partner with the largest facilitator of Bargain Sales in the US and can close transactions with a vast majority in cash. We maximize the cash to seller and we have a solid network of MAI appraisers experienced with the IRS mandated valuation standards to optimize the deduction. With complicated compliance and process mandates under IRS code, most sellers and brokers turn to us to assist with such sales.
Contact Us for a custom proposal based on the seller’s scenario.