A Section 1031 bargain sale involves the exchange of real property where the seller sells the property for less than its fair market value, often to a charitable organization, while still qualifying for a like-kind exchange under Section 1031 of the Internal Revenue Code. In this scenario, the seller receives some cash or other property (the "bargain" part of the sale) and the remainder of the property's value is considered a charitable contribution.

The transaction allows the seller to defer capital gains taxes on the portion of the property that is exchanged for like-kind property, while potentially receiving a charitable deduction for the portion of the property's value that is donated. However, it's important to note that the cash or other property received in the transaction (known as "boot") may be subject to capital gains tax. The key to a successful Section 1031 bargain sale is ensuring that the transaction meets all the requirements for a like-kind exchange, including the use of a qualified intermediary and adherence to strict timelines. (Rev Rul 78-163)