What is a Charitable Bargain Sale?

It is a sale of your residence to Williams at less than its fair market value. You receive cash from the transaction that you can use to purchase your next residence, or as a down payment on a retirement facility, plus a charitable deduction for the discount you took from the market value. The concept also applies to an outright donation of a residence where Williams assumes the mortgage.

How Does It Work?

You and Williams agree to a purchase price that is less than the property’s fair market value, as determined by independent appraisal. Williams may pay the purchase amount upfront, or issue you an installment note for a mutually agreed upon term of years and interest rate. Williams then liquidates the property. Result? You qualify for a charitable income tax deduction and avoid capital gains tax on the gift portion of the transaction. In addition to making a significant gift to Williams, you can receive a lump sum for the move to your next home or receive income for a term of years.

What are the Advantages?

1. A bargain sale is simple and inexpensive. The agreement is usually a few pages and there are no significant legal expenses in setting it up.
2. A bargain sale is flexible. The terms of the agreement—interest rate, down payment, term, frequency of payments, gift portion and tax deduction—are all negotiable and can be adjusted to fit your goals and objectives.
3. A bargain sale is tax-efficient. It often produces better tax results than a traditional life-income gift (Pooled Income Fund, Charitable Gift Annuity, etc.).

Since gifts of real estate can involve issues of valuation, environmental liability, pre-arranged sale, and other issues, they should be carefully reviewed by legal and tax counsel and by the Williams College Office of Gift Planning before any arrangements are made.

For further information, call (413) 597-3538, email the Williams College Office of Gift Planning, or complete the personal illustration form on this website so that we can assist you through every step of the process.