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Bargain sale

I love my land and want to know my buyer will protect and care for it. I can afford to reduce my price to make that happen, especially when I consider my tax savings.

Rather than sell at fair market value, you can sell your land to your conservation partner at a reduced price. Whether the price reduction is a little or a lot, a bargain sale is a popular option for protecting conservation land. Bargain sellers may get a substantial part of their donation returned in tax savings.

Bargain sale benefits

A bargain sale can benefit you and the buyer:

• You receive proceeds from the sale of your land, though less than fair market value.
• You may qualify for an income tax deduction based on the discounted price of your sale. Meanwhile, your capital gains taxes associated with the sale may become smaller or nonexistent. See the tax case study for a side-by-side comparison of the tax impacts on a bargain sale, fair market sale and full donation.
• Bargain sales help conservation groups, which always have limited funds, to afford the land purchase. Your generosity also helps them attract other private donors and public grants to cover the remaining purchase price.
• You get to see the benefits of your legacy during your lifetime—and may qualify for naming rights or other intangible benefits.

Talk it over

Even when offered land at a reduced price, your conservation partner may need time to raise funds for purchase. Talk with your partner in advance about ways to ease the purchase process for each other. For example, your buyer can often help you time your gift to a specific tax year. As with fair market sales, you can offer special considerations like an exclusive option to buy or extended payment terms.

Meanwhile, if tax savings are important to you, discuss bargain sale terms with your financial advisors. Many bargain sellers recoup part of their donation in tax savings.

Find more details about the financial and tax impacts of conservation protections.

reprinted from Landowner’s Options, © 2007, Iowa Natural Heritage Foundation