8 Steps to a Bargain Sale
STEP 1 – Preliminary Valuation & Proposal
Buyer representative (Welfont) does preliminary valuation of available property and sends proposal for potential Bargain Sale Transaction to the Seller (Welfont’s valuation has historically fell within less than 5% of the final appraisal)
STEP 2 – Seller Objectives Are Reviewed
Buyer representative (Welfont Agent) meets with Seller to discuss the property and the Seller’s needs and objectives. Welfont reviews proposal together with Seller and Seller’s tax and/or legal advisors to understand solution and process of a Bargain Sale.
STEP 3 – Letter of Intent
If the proposal fits the Seller’s needs, Seller executes a non-binding Letter of Intent with the Buyer, containing terms of an agreement, a potential value, the cash consideration amount, an allocation of transaction costs or credits, and the basic provisions of the property transfer.
STEP 4 – Purchase and Sale Agreement
The executed LOI is converted to a binding Agreement (Purchase and Sale Agreement “PSA”)
STEP 5 – Due Diligence
The Due Diligence process begins:
- Buyer performs financial, environmental, physical, etc. review of asset
- Seller hires “Qualified Appraiser” to provide “Qualified Appraisal” as outlined by IRC 170.
- If property review and appraisal meet requirements of PSA, due diligence is waived and Closing is scheduled
STEP 6 - Closing
Property is transferred for consideration:
- Tax Deduction (Form 8283)
STEP 7 – Submit Form 8283
When Seller files taxes, Seller must submit Form 8283. Seller has current year + 5 years to use deduction.
STEP 8 – Non-Profit Benefit
Buyer resells the property and uses excess proceeds from the transaction to fund ongoing needs of nonprofit and its mission.
Disclaimer: Welfont is not a legal, financial, investment adviser or tax accounting firm and does not offer any legal, financial, or tax services or advice. Although the information contained herein is presented in good faith and believed to be correct, it is general in nature, so those considering transactions related to Internal Revenue Code 170 should consult their own tax counsel and/or tax professional or both. Furthermore, the information contained herein may not be applicable or suitable to some parties.