Whether a nonprofit’s mission calls for office space, warehouse facilities, or something in between, most charitable enterprises need a physical location to serve their constituents. Unfortunately, nonprofit organizations are frequently left empty handed when they search for competitively-priced commercial property to house their operations.
Enter the charitable bargain sale, a giving vehicle that allows a donor to facilitate the transfer of much-needed real estate to a favorite charity at a price the charity can afford, while at the same time earning the donor a tax deduction.
The bargain sale, frequently heralded as the earliest charitable giving vehicle, results in the real estate owner serving in both the role of a seller for the cash portion of the sale to a charity, and also in the role of a donor for the donated portion of the property.
As is the case with many types of charitable gifts, establishing fair market value of the subject real estate is critical and requires a qualified appraisal that complies with IRS regulations. Establishing the fair market value in turn determines the charitable donation portion, which is the difference between the fair market value and the lower cash amount paid by the charity to the donor/seller.
A post-pandemic world may create new opportunities for your clients to consider bargain sales of property to charities. Indeed, nearly $430 billion in commercial and multifamily real estate debt was set to mature in 2021, opening up conversations about what property is really worth and how owners can most efficiently unlock its value.
The team at Cobb Community Foundation is a resource and sounding board as you serve your philanthropic clients. We understand the charitable side of the equation and are happy to serve as a secondary source as you manage the primary relationship with your clients. This newsletter is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice
