Bargain Sale of Land

While the MET has the authority to enter into bargain sale agreements, such transactions are dependent on current State appropriations and management priorities. (Local land trusts may also be subject to availability of funds.) The sale of property by a landowner to the trust may be arranged at a price that is acknowledged by both parties to be below the fair market value. The difference between the sale price and the fair market value is considered to be a charitable gift to the trust and is therefore deductible from the landowner's taxable income. The price paid for the property, being less than full value, also represents a reduction in taxable income for the landowner.

Bargain-sale arrangements with the land trust provide the landowner with immediate financial return as well as tax gains. For the trust, such acquisitions facilitate the efficient use of limited funds with the possibility of rollover. Generally the MET will enter a bargain-sale only where the price is 50% or less of fair market value, and where there is reasonable expectation that the property can be restricted by a conservation easement and resold to recover all or most of the purchase money.

National land trusts operating in Maryland, such as The Nature Conservancy, The Trust for Public Land, and The Conservation Fund, are experienced in negotiating bargain sales from private owners of large land parcels; such lands are usually transferred later to a unit of government such as Program Open Space or the US National Park Service.

Under the State's MALPF program, landowners make easement sale offers that are discounted below market value, in order to achieve a higher ranking under MALPF's prioritization system, and this discounting can result in bargain sale. The IRS deductibility of the bargain sale element of this transaction must be established by an independent market-based appraisal of the easement value.

For more information on these fee-simple options contact:

Doug Donahue at the Maryland Environmental Trust (MET)
410-514-7907
ddonahue@dnr.state.md.us
TOPICS IN THIS SECTION
Outright Donation of Land
Donation of a Remainder Interest
Donation of Land by Will
Bargain Sale of Land
Conservation Buyers
IN THEIR OWN WORDS
What motivates landowners to protect their land? Hear what landowners say about why they donated or sold a permanent conservation easement on their land.

"My stepfather, Paul Bailey, taught me that people do not own the land but are stewards of the land. When I as growing up he took me fishing and hunting near a farm we had in Calvert County. A lawyer for 62 years, he is remembered today as a "Conservator and a True Friend of St. Mary's County" - a quote that is on his grave marker. MET's easement program was recommended to our family -- and my wife and I talked it over with our sons and they agreed that they wanted the farm to be protected. Trent Hall was built in 1789, a 300-acre property that was a part of 2,200 acres granted to Thomas Truman in 1658. He's our resident ghost, but a friendly one. We purchased Trent Hall in 1955. I consider myself a strong advocate for preservation, however, not at the expense of farmers. Economically-viable farming is a key to preserving farmland. When we did the easement in 1978, we had reserved three rights for additional houses and we wanted to reduce that number to one. An additional benefit was that we were able to claim tax benefits for the donation of those two development rights."

Henry Virts, former MET Board Member, St. Mary's County, Maryland. MET Easement recorded in 1978.
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