What it is:
Just like it sounds, a “bargain sale” to the Foundation is a sale of property for a price less than its fair market value. The difference between the fair market value and the sales price constitutes a charitable gift. Thus, the donor/seller is able to recoup some cash and use the balance as a charitable gift. There may be numerous reasons for wanting to do a bargain sale versus a gift of the entire property, but the most common situation is that you want to generate some cash from the sale of the appreciated asset versus donating the whole thing
Why do this: Bargain sales to charity allow donors to support a favorite cause while also gaining some liquidity in return. For example, when appreciated property is worth more than a prospective donor is willing or able to give, a bargain sale can split the asset into two pieces: a deductible contribution and a taxable sale. Using the bargain sale method, advisors can help clients make charitable donations and pay less tax than they would if they had sold an asset and donated the proceeds.