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Nonprofit Law/501(c)(3) buying property


A friend of mine wants to form a 501(c)(3) entity and purchase a horse farm (to later be used as a horse therapy facility for mentally and physically challenged persons).  The question is - are there any tax or other benefits to the SELLER of the farm to the 501(c)(3) entity?  Or will the purchase funds paid by the 501(c)(3) simply be treated as taxable income as if it was a for-profit purchaser?

I am assuming that the seller will be selling the farm for the fair market value.  If that is correct, then the seller will not realize any tax benefits whether it is sold to a for-profit or a nonprofit.  However, if the seller gives a discount, that part is considered deductible as charitable contributions for federal income tax purposes. It is called a bargain sale.

A bargain sale of property to a qualified organization (a sale or
exchange for less than the property's fair market value) is partly
a charitable contribution and partly a sale or exchange. That is
discussed on page 13 on the left right column of "Bargain Sales"

Harvey Mechanic, Attorney at Law -

P.S. This response is intended to be a general statement of law, should not be relied upon as legal advice and does not create an attorney/client relationship.  

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Harvey Mechanic


I am an attorney and I volunteer time to answer general questions about U.S. Federal income tax issues of nonprofit 501(c)(3) public charities only. Those questions could be about establishing and maintaining legal requirements for such non-profit organizations in the United States, including Internal Revenue service filings and requirements. I will not be working on this free forum to answer questions about Nonprofit's possible unrelated or for-profit businesses or how to fill out forms. This forum is only for general questions about federal tax law, not as the law applies to your specific situation. If you do not make your question public then I will not be spending much of my donated time on answers that would not benefit the public. If you have other questions, please contact me at I will reply from my email. In any case, do not reveal confidential information to me until after I have contracted with you to provide personal legal services. My responses on this forum are intended to be general statements of law, should not be relied upon as legal advice, and do not create an attorney/client relationship. For me to consider your individual situation and how the law applies, I would need to gather extensive information about the situation. To search my previous answers you can do a Google search by "" without the quotes and then add your search terms before hitting enter.


I have been practicing law and especially the law of nonprofit organizations since 1990 when I was admitted to the New York Bar and I have maintained my status with the Bar since that time.


B.S. Columbia University in New York City, 1970

J.D. (Law Degree) Brooklyn Law School, 1990 -- Cum Laude.

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