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 Pine Street 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.
By removing your property from your estate, you may also reduce estate taxes and probate costs when your estate is settled. Please contact us about the property you are considering so that we can discuss the considerations whether we would be interested in acquiring the property for a bargain price.
Alfredo Dunlap, a devoted supporter of Pine Street Inn, owns vacant land that he purchased years ago for $15,000. The land was recently appraised at $250,000. Alfredo 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.
Alfredo 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 deduction, which will create tax savings that more than offset the capital gains tax he'll need to pay. This example assumes Alfredo 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 Alfredo |
+ $50,000 |
| Total benefit to Alfredo |
$114,600 |
*Assumes 37% rate and thatAlfredo itemizes his income tax charitable deductions.
With a gift known as a bargain sale, you sell us a valuable asset, such as real estate, for less than it is worth, and in exchange you receive immediate cash equal to your sale price. Your property becomes ours to use or sell.