What is Bargain sale to charity?
In short
A bargain sale to charity is a sale of property to a charity for less than its fair market value. It is treated as partly a sale and partly a gift, with the property's basis split between them in proportion to the sale price over the fair market value.
Key takeaways
- Gain is recognized on the sale part.
- The gift part is a charitable contribution.
- Selling at basis doesn't avoid gain, because only part of the basis goes to the sale.
Example
Stock worth $100,000 with a basis of $40,000 sold to a charity for $40,000: basis allocated to the sale is $16,000, so gain is $24,000 and the gift is $60,000.
Where it's tested
TCP: Individual Tax Planning Strategies — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
A taxpayer sells stock at a $10,000 loss on December 10 and repurchases the same stock on December 28 of the same year. What is the tax result?