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A bargain sale of real estate occurs when a person makes a contribution to a public charity by selling the charity property at a price that is intentionally set below its fair market value. The donation is equal to the amount by which the property’s fair market value exceeds the bargain sale price paid by the 501(c)(3) organization. See I.R.C. § 170(e)(1) & (2). A bargain sale also occurs if the nonprofit assumes an existing mortgage on the property and the mortgage assumed plus any amount paid by the nonprofit is less than the fair market value of the property. The amount of the mortgage is treated as part of the sales price of the property.
A nonprofit must provide a written acknowledgment for each donation of real property. The written acknowledgment should contain: 1) the name of the charity; 2) a description of the real estate donated; 3) the date and location of the contribution; and 4) a statement about what, if any, goods or services were provided by the charity to the contributor in return for the contribution. See I.R.C. § 170(f)(8) & (17); Treas. Reg. § 1.170A-13(a)(1) and (b)(1).
The donation is claimed in the year of the sale.
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is fair market value usually justified and accepted by irs by assessed value by the municipal govt in
Fair market value would be whatever you could get for the property if you had it on the open market. An assessment/appraisal should be obtained. The donation is equal to the amount by which the property’s fair market value exceeds the bargain sale price paid by the 501(c)(3) organization.
in your experience will irs accept the assessed value by the county government as fair market value?
Yes if it is a current assessment (with in the year).
Your positive rating is always thanks enough.
Do not forget to report the sale as well on Schedule D. Thanks again