Bargain Sales Bargain sales are sales of property, such as securities or real estate, to the Arch Foundation for the University of Georgia, Inc. for less than the full fair market value. A bargain sale consists of a sale portion and a gift portion. Usually, the University pays you an amount equal to your cost basis in the asset. This way you are able to recover your original investment. A portion of the appreciation of the asset is considered a gift to the University, and you receive a tax deduction for this amount. You will owe taxes only on the part of the gain attributable to the bargain sale. The gain to be recognized is determined by dividing the selling price to UGA by the fair market value, then multiplying that result by the total gain in value. Example: Mr. Brown owns real estate recently appraised at $100,000. He bought the land many years ago for $20,000. He offers to see the land to the University for $20,000. The Arch Foundation agrees to this bargain sale. The results are as follows: 1. Mr. Brown receives $20,000 from the Arch Foundation. 2. He can take a charitable contribution deduction of $80,000 (the appreciated portion, which he is giving to UGAF). 3. He must report a $16,000 capital gain, based on the formula above ($80K x $20K/$100K = $16K) His capital gains tax should be no more than $16,000 x 20% (the normal capital gains tax rate) = $3,200. Types of Giving | Featured Donors | Professional Advisory Reference | Heritage Society | Get In Touch! | Home