Are you a philanthropist and need tax deductions?

Section 170 Bargain Sale: A Potential Strategic 1031 Exchange Exit Option

Maximizing Tax Benefits Through a Philanthropic Approach

Sometimes, accepting a lower sale price for an investment property can be more advantageous if it results in a significant tax deduction. If you or your business anticipate substantial income in the coming years, leveraging a larger tax deduction may provide greater financial benefits than the proceeds from a conventional sale.

Find out if it’s right for you

Understanding IRC Section 170 vs. 1031 Exchanges

Unlike a 1031 Exchange, which serves as a tax-deferral strategy, an Internal Revenue Code (IRC) Section 170 Bargain Sale functions as a tax mitigation tool. Established in 1917, IRC Section 170 predates the more commonly known IRC Section 1031, introduced in 1921.

A 1031 Exchange enables investors to defer capital gains taxes by reinvesting proceeds into qualifying replacement properties, provided compliance with strict guidelines. This approach fosters long-term wealth accumulation by using tax savings as leverage to acquire additional real estate assets instead of immediately paying capital gains taxes.

While a 1031 Exchange is an excellent tool for growing wealth, it also requires long-term commitment. If a replacement property acquired through a previous 1031 Exchange is later sold through a traditional transaction, all deferred capital gains will compound with new taxable gains—resulting in significant tax liability.

For investors who do not intend to hold properties indefinitely, or who struggle to find suitable replacement assets, a Section 170 Bargain Sale may offer a more favorable tax mitigation strategy, potentially even excluding some taxable gains altogether.

Who Benefits from an IRC Section 170 Bargain Sale?

An IRC Section 170 Bargain Sale is ideal for real estate owners seeking to support a qualified nonprofit organization while receiving substantial tax benefits. Unlike a 1031 Exchange, this strategy does not require a 1031 Exchange Services or strict timelines. However, working with an experienced real estate firm specializing in these transactions ensures compliance and maximizes advantages. This approach is particularly beneficial for those who:

Previously participated in 1031 Exchanges but want to exit the deferral cycle
Seek substantial tax savings due to high net worth, expected future earnings, or long-term property ownership
Own assets with significant depreciation and/or considerable capital gains exposure
Own assets that are difficult to market in their current condition, generate little to no income, or have high carrying costs (with or without significant depreciation or capital gains exposure).

Unlock Tax Savings with a Strategic Approach

Schedule an online consultation to assess preliminary eligibility and gain access to an expert team of real estate professionals and their network of qualified nonprofits. With successful negotiations, sellers can receive cash compensation alongside a significant tax deduction—currently up to 60% of Annual Gross Income (AGI) for the tax year in which the sale occurs.

Additionally, excess deductions may be carried forward for up to five years, providing ongoing tax benefits while offsetting future earnings. Furthermore, a 1031 Exchange can be applied to the cash portion of the sale to defer any remaining taxable gains—we can guide you through this process as well. For more information:

eCFR :: 26 CFR 1.170A-1 — Charitable, etc., contributions and gifts; allowance of deduction.

Is a 170 Bargain Sale
Right for You?

The best way to determine eligibility is through a free consultation. Contact us today to explore whether an IRC Section 170 Bargain Sale is the optimal tax-saving strategy for your real estate portfolio.