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 NAVIGATING THE “BARGAIN SALE DONATION”
A “bargain sale” of a high-end asset to a qualified nonprofit organization allows the seller both to receive cash from the sale and to claim a charitable
contribution for a tax deduction as permitted by law. The difference between the appraised value of the boat at the time of the sale and the cash received can be used to reduce up to 50 percent of the donor / seller’s adjusted gross income (AGI) for that year and up to five years thereafter.
BARGAIN SALE OPTION
Depending on its condition, you could receive immediate cash up to an amount of $200,000, plus a receipt for $250,000 as a tax-deductible donation to the chosen nonprofit organization. This could reduce your AGI by as much as 50 percent and can be carried forward up to six years.
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APPRAISED VALUE:
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$450,000
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BARGAIN SALE CASH:
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$200,000
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CHARITABLE
CONTRIBUTION: |
$250,000
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Based on an annual income of $180,000, you may use the donation to reduce your AGI by up to 50% each year as a deduction on your tax returns (i.e. at a 40% tax bracket) saving up to $100,000 in taxes over the next two years. The bottom line to you is net $300,000, with cash in hand and the balance secured! All ongoing costs have disappeared, with no broker’s commission to be paid. You may even choose the charity where the
resulting funds will go.
CASH PORTION OF
BARGAIN SALE:
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$200,000
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| BARGAIN SALE:
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| FIRST YEAR
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TAX SAVINGS:
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$90,000
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| SECOND YEAR
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TAX SAVINGS:
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$10,000
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TOTAL
VALUE RECEIVED: |
$300,000
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