IRS Section 170 Bargain Sale and its Conditions
IRS Section 170 Bargain Sale and its Conditions
Edited by Joseph Garnett, Jr. – Written by Mike Wolfe
As our regular visitors know already, the 170 Exchange is an amazing transaction by which an investor gets to do a good deed. The investor also cashes in on a dated real estate property’s value and receives a considerable chunk of very real immediate tax rebates. Consequently, the investor helps nonprofit organizations and the entire community. This process is truly an amazing opportunity for all involved. An ultimate win-win situation. It is not enough, however, to find a nonprofit and make the sale. Some conditions must apply for the businessperson to donate to get the tax benefits from the deal. Those conditions are outlined in the IRS Section 170 Bargain Sale, also known as the 170 Exchange.
To execute an IRS Section 170 Bargain Sale, certain conditions must be met. Conditions such as the seller must have a significant tax liability, and the buyer must be a nonprofit.
The Specifics of an IRS Section 170 Bargain Sale
The general outline of the deal is simple – a commercial real estate owner sells a piece of the property below its fair and full market value to a charitable organization. The difference between the sale price and total property value is the sum to be deducted from the donor’s income.
But there is more that needs to understand about the IRS Section 170 Bargain Sale. First, there is a list of commercial properties that can be a part of the 170 Exchange. Then there is the value assessment, which will be influenced by things like mortgages attached to the property, which will reduce the amount you can claim for the rebate.
Additionally, the entrepreneur should have a sufficient level of taxable income to qualify. There is also a list of federally recognized 501(c)(3) entities, which are the only nonprofits allowed to participate in the 170 Exchange transaction on the buyer side. Finally, there should be two appraisals—one by an MAI Designated appraiser to evaluate it conducted within 60 days of the sale.
The Benefits of an IRS Section 170 Bargain Sale
Its incomparable benefits dictate the restrictions on the deal. Unlike the 1031 Exchange, the 170 Exchange offers not a deferral of taxes but an immediate rebate on the donated sum. Moreover, there is a significant chance of significant tax deductions from the Exchange for up to 5 years. The deduction, in addition to the immediate tax gain for sale.
Conclusion
If you want to learn more about this fantastic transaction, you came to the right place. We at The Welfont Group specialize in connecting entrepreneurs with nonprofits for this purpose. Ours is a long-standing record of excellence and diligent service. We help business people and nonprofits connect and benefit from each other and the entire community. Whether you are a commercial real estate owner wanting to donate or a nonprofit looking for donations, call us now, and we will be glad to assist you.