A donor who wants to recover a portion of the value of the property that he or she wishes to contribute to Dalton may consider entering into a bargain-sale transaction. In effect, a bargain sale is a sale of property to charity for less than its fair-market value. The bargain-sale price must be any amount mutually acceptable to the charity and the donor.

Example: Jonathan, 78, owns a vacation home he no longer uses. He bought the home for $40,000 some years ago, and it is now worth $120,000. He offers to sell it to Dalton for $40,000. As a result, he receives $40,000 from Dalton and can deduct the contributed portion of $80,000 for income-tax purposes. Jonathan must also report a capital gain of $26,667. (The reportable capital gain is calculated by dividing the sale price of $40,000 by the fair-market value of the property—$120,000—and multiplying the result by the gain—$80,000.)