Posted on: March 16, 2009
A bargain sale occurs when a member of a church congregation sells an asset (land, buildings, securities, vehicles, etc) to the church for less than market value. When this occurs, the church has received an “in-kind” donation.
The amount of the donation can be calculated as the difference between the fair market value of the asset and the amount the church actually pays for the asset. There is a significant benefit to the donor/seller as well because of the potential substantial charitable contribution tax deduction.
A bargain sale results in a transaction that is partly a sale and partly a charitable deduction. The donor/seller will need to calculate the amount of any deductible charitable contribution and also any taxable gain from the sale portion of the transaction.
In order to assure accuracy on both sides, we would encourage the church and the donor together to obtain an appraisal of the asset to determine its fair market value. And, of course, the church and the donor should consult with their financial and tax professionals to make sure they are in compliance with applicable tax regulations.
Dave Dallenbach
Consultant
Foundation Capital Resources