Bargain Sale Rules
Description
How to fill out New Jersey Bargain And Sale Deed - With Covenants As To Grantor's Acts?
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FAQ
Like the 1031 Exchange, the IRS Section 170 Bargain Sale was created by Congress (in 1917) and is overseen by the Internal Revenue Service. A Bargain Sale is an IRS approved transaction and differs from a 1031 Exchange in that the seller is not required to reinvest sale proceeds.
Definition: A bargain sale is when property is sold for less than its fair market value. The difference between the sale price and the fair market value must be taken into account for tax purposes. If the sale is between family members, it may lead to gift-tax consequences.
For this reason, a bargain sale is often termed ?part sale, part gift.? For example: A donor wishes to gift an antique to Clarkson but cannot afford to give the entire value of the property. The item was purchased for $25,000 and now has an appraised value of $100,000.
In addition, a bargain sale ratio equal to the total consideration divided by the total value of the property is calculated. (3) This ratio multiplied by the total gain (total fair market value minus cost basis) is the capital gain that must be reported on the sale portion of the bargain sale.
A bargain sale occurs when a taxpayer sells property to a charitable organization for less than its fair market value (FMV). The difference between the FMV and the amount realized, the ?bargain element,? is intended to be a charitable contribution.