By selling a valuable asset to Carnegie Mellon for less than its worth, you can receive immediate cash and fulfill your charitable intentions to CMU.
A bargain sale may be right for you if:
- You want additional cash now.
- You itemize your deductions and want to save income taxes.
- You want to save capital gains tax on the sale of your property.
- You own a valuable asset that you are willing to sell for less than it is worth.
- You want to make a gift to Carnegie Mellon.
How It Works
You sell real estate or other property to Carnegie Mellon University for less than it is worth.
You receive immediate cash equal to your sale price. Your property becomes CMU's to use or sell.
Features of Bargain Sale
Any sort of property is eligible for a bargain sale. In addition to real estate, you can complete a bargain sale arrangement with collectibles such as artwork or antiques, other personal property, or securities. Please contact us about the property you are considering so that we can discuss whether we would be interested in acquiring the property through this type of arrangement.
You will receive an income tax charitable deduction in the year of your gift. The amount of your deduction will equal the difference between the fair market value of the property you donate and your sale price. Your income tax savings will depend on if you itemize your deductions.
You will also avoid capital gains tax on a portion of your capital gain in the property. For example, if you sell your property to us for one third of its fair market value, you will pay capital gains tax on just one third of your capital gain in the property.
By removing your property from your estate, you may also reduce estate taxes and probate costs when your estate is settled.
If you are interested in selling us real estate or tangible personal property at a bargain price, you will need to establish the value of your property by obtaining a qualified, independent appraisal.
To be valid for claiming your income tax charitable deduction, your appraisal must be conducted no more than 60 days before the bargain sale is completed and no later than the due date, including extensions, of the tax return for the year in which you make your gift.
If you are considering a gift of real estate, Carnegie Mellon requires the following additional steps before we may accept your gift:
- Independent of your appraiser's valuation, we will need to examine your property and conduct our own analysis of its value. We will need to know if there are any debts, taxes, or liens owed on your property.
- Once we accept your gift of real estate, we become responsible for cleaning up any environmental problems on your property. This sort of cleanup can be very expensive. Therefore, before we accept any gift of real estate, we routinely conduct a review to make sure the property has no environmental issues.
Larry Mathis, a devoted supporter of Carnegie Mellon University, owns vacant land that he purchased years ago for $15,000. The land was recently appraised at $250,000. Larry would like to make a major contribution to the University, but he is planning improvements to his home and he needs about $50,000 to finance his project.
Larry is thrilled to learn that a bargain sale arrangement will allow him to make the contribution to CMU he envisions and receive the cash he needs to complete his home improvement project. He is also pleased with his $200,000 income tax deduction, which will create tax savings that more than offsets the capital gains tax he will need to pay. This example assumes Larry is able to itemize his income tax charitable deduction.
|Value of land:||$250,000|
|Cost of land:||$15,000|
|Income tax deduction:||$200,000|
|Capital gain to report:||$47,000|
|Capital gain avoided:||$188,000|
|Income tax saved @ 37% rate:||$74,000|
|Capital gain tax @ 20% rate:||- $9,400|
|Net tax savings:||$64,600|
|Cash to Larry:||+ $50,000|
|Total benefit to Larry:||$114,600|
*Assumes 37% rate and thatLarry itemizes his income tax charitable deductions.