Gift Planning

Picture QuoteWith 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.

A bargain sale may be right for you if:

  • You want additional cash now.
  • You itemize your deductions and want to save income taxes.
  • You own a valuable asset that you are willing to sell for less than it is worth.
  • You want to make a gift to Pine Street.

It is possible to sell any sort of property to us for a bargain price. In addition to real estate, you can complete a bargain sale arrangement with collectibles such as artwork or antiques, other personal property or securities.

 

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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. 

 

Example

George Thanos, 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. George 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.

George 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 George 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 George + $50,000
Total benefit to George  $114,600

*Assumes 37% rate and thatGeorge itemizes his income tax charitable deductions.

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Pine Street Inn and its staff do not provide legal, tax or financial advice. For such advice, please consult your own professional advisor.