Offsetting the Costs of Capital Expenditures

The Bargain Sale can offset the impact of some Capital Expenditures.Corporations and affluent individuals face a continuing challenge of offsetting costs of Capital Expenditures, otherwise known as CapEx. CapEx occurs through the acquisition of assets that will have a useful life beyond the tax year. For example, a business might buy new assets, like buildings, machinery, or equipment, or it might upgrade existing facilities so their value increases. While CapEx can affect a company or individual’s productivity and the sale of the asset, an IRS Section 170 Bargain Sale may present options for alleviating these challenges.

CapEx includes expensive “big ticket” items that need to be replaced every so often, but not every month or year. This could include roofs, appliances, driveways, plumbing systems, or any other large item you should budget for but that do not occur enough to be easily accounted for.

A company’s high CapEx costs may present two major factors concerning productivity and disposition of the asset. Business productivity, like marketing or a new sales venture, can suffer when money is spent on large maintenance costs. Secondly, if the maintenance has not been kept up to date when an individual goes to sell the property, the large repair expenses don’t attract potential buyers. Most buyers want to feel like they are getting their money’s worth and hesitate purchasing property requiring large maintenance repairs.

Influence of the Bargain Sale

A Bargain Sale may be a key factor in offsetting Capital Expenditures. Depending on the asset’s condition and repair needs, a qualified Bargain Sale appraisal may allow a high enough valuation for the seller to complete a transaction by foregoing the cash portion and only receiving the tax benefits. This process may act as an incentive so the buyer has funding to complete the repairs after taking ownership. Once again, it all depends on the costs of repairs. Both the seller and nonprofits must agree on the terms.

Profit from the sale of property or investment, otherwise known as Capital Gains, can be taxed. If the asset is sold on a traditional retail market, these taxes can be considered high. Other taxes may be connected to the asset, if it is connected to a deferment in a 1031 Exchange. The tax benefits, may lessen or completely offset some tax liabilities.

Considering the Bargain Sale

When trying to understand Capital Expenditures, corporations and affluent individuals may consider the Bargain Sale and advantages for offsetting taxes. The qualified appraisal process may lead to a valuation that helps in selling the property. This process allows sizable tax deductions, giving the seller the option to forego cash to add incentive for the buyer.

To learn more about the use of the IRS Section 170 Bargain Sale and Capital Expenditures, please visit Welfont at You can also get in touch with us via email at Welfont can help provide explanations for clients to show why the Bargain Sale can be an effective approach for CapEx and taxes.

We are experts with every facet of the Bargain Sale. We work with a stable of stakeholders from every stage of the process:  sellers, brokers, CPAs, nonprofits and new buyers or investors. While helping clients obtain the largest ROI possible, Welfont manages investments from the research phase through the acquisition and disposition.

Written by Joseph Garnett, Jr. – Marketing Communications Specialist  – The Welfont Group, LLC