Bargain Sale

A bargain sale is a sale of property, such as securities or real estate, to Raritan Bay Healthcare Foundation for less than the full fair market value. A bargain sale consists of a sale portion and a gift portion. Usually, but not necessarily, the Foundation pays you an amount equal to your cost basis in the asset. This way you recover your original investment. A portion of the appreciation of the asset is considered a gift to the Foundation, and you receive a tax deduction for this amount. You will owe taxes only on the part of the gain attributable to the bargain sale. The gain to be realized is determined by dividing the selling price to the Foundation by the fair market value, then multiplying that result by the total gain in value.