Charitable Bargain Sale
How it Works
- You sell your residence or other property to the Cortland College Foundation for a price below the appraised market value -- a transaction that is part charitable gift and part sale.
- SUNY Cortland through the Cortland College Foundation may use the property, but usually elects to sell it and use the proceeds of the sale for the gift purposes you specified.
Benefits
- You receive an immediate income tax deduction for the discount you took from the appraised market value of your property.
- You pay no capital gains tax on the donated portion of the property.
- You can receive payment from us in a lump sum, or in fixed installments.
Questions and Answers
What if the property has a mortgage or other lien on it?
The mortgage or lien can and should be paid off prior to the bargain sale or with the sale proceeds received by the previous owner. This produces the best tax benefit to the donor/seller. If the charity assumes the lien or mortgage then this is considered taxable income to the donor/seller.
Can I arrange for a gift annuity with the sale proceeds of the deal?
Assuming there are net sale proceeds to the donor/seller, these proceeds can be used to establish a charitable gift annuity. Or the gift portion of the bargain sale can be used for a gift annuity contract. For example, a donor arranges a bargain sale of real estate with SUNY Cortland through the Cortland College Foundation for the sale price of $100,000. The property has an appraised market value of $200,000 thus making this arrangement a bargain sale of $100,000 and a charitable gift of $100,000. The donor can turn around and donate the sale proceeds ($100,000) received in this deal for a charitable gift annuity. This produces the maximum tax benefits for the donor. On the other hand the charity can agree to a charitable gift annuity contract based on the donated portion ($100,000) of the bargain sale.
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