Some landowners owning important conservation property may need to sell their land. A bargain sale is a hybrid strategy that can meet the financial needs and vision of your client. The landowner sells the property for less than full market value to a land trust. This reduces capital gains and may enable the donor to take advantage of the Federal Income Tax Deduction, and NC or SC State Tax Credit for the difference between full market value and the sale price.

Note, the cost basis for the sale portion is reduced by the ratio of the sale price to the market value. For example, Mrs.Walters sells her $2,000,000 conservation property to the local land trust for $1,250,000. Her original cost basis was $100,000. She reduces it to $62,500 ($1,250,000/$2,000,000 = 62.50%). Her capital gain is $1,187,500 ($1,250,000 minus $62,500).

She has made a gift of $750,000 which partially offsets the capital gains. She can carry forward the unused federal and state tax incentives for up to five years.