From Jewish Values Online:
The Chofetz Chaim (Of Blessed Memory) states that a Torah written by a heretic must be burned. At an economic loss of $15,000 upwards, Is it permissible ethically and according to Jewish values to make full disclosure of the defects of such a Torah, and sell it under those conditions to a Conservative or Reform (or any) congregation that is in need of one? It is assumed that the text of the Torah itself is without error or shmad (heretical defect).
Thank you for writing to me about your concern. Now, let us take a look at the issues you raise.
Part 1: Defining the Problem
There are many issues and presumptions that you make in your question that are in my opinion, dubious in nature. For example, you presume that a Torah written by a “heretic” “ought to be burned.” However, you never define “Who is a heretic?” Just as the “Who is a Jew?” is a debate, so too is the question, “Who is a heretic?” Still and all, you never defined your terms and such assumptions can only lead to erroneous conclusions that are not warranted by the Halacha. Given the political nature of Judaism today, I must question whether it even proper to assert that “Reform” or “Conservative” rabbis are justly considered “heretics” because of their alleged “heretical” views.”
Historically, unlike Christianity that posits proper belief is essential for salvation, Judaism has historically been more concerned about “Ortho-prax,” proper religious behavior rather than the matter of “Orthodox” (“correct opinions”). According to Webster’s Dictionary, “orthodox derives from the Latin orthodoxus, Greek ὀρθόδοξος; ὀρθός right, true + δόξα opinion, δοκεῖν to think.” Webster goes on to add.
- Sound in opinion or doctrine, especially in religious doctrine; hence, holding the Christian faith; believing the doctrines taught in the Scriptures;—opposed to heretical and heterodox; as, an orthodox Christian.
- According or congruous with the doctrines of Scripture, the creed of a church, the decree of a council, or the like; as, an orthodox opinion, book, etc.
- Approved; conventional.
As you can see, the very term that many “observant” Jews use to define themselves reflects—ironically and paradoxically—Christian influence. One might even say that many observant Jews today are oblivious to the Christianization of Judaic belief; throughout Jewish history, no one rabbi has ever had the authority to speak “ex cathedra,” so to speak. (Please pardon my pun.)
Part 2: The Talmudic Origin of the Law Regarding the Heretic’s Torah
Before going any further in answering the other halachic issues you raise, I think it is important to examine the origin of this particular halacha, which derives from the Talmudic tractate Gittin 45b:
- R. Nahman said: We have it on tradition that a Torah scroll that has been written by a Min should be burnt, and one written by a heathen should be stored away.
In the interest of brevity, we need to define what exactly is meant by the term “min” and after we define this term, we need to determine whether one may apply “min” to anyone who happens to be a non-Orthodox rabbi or a member of a non-Orthodox synagogue.
According to the Soncino Talmud (which was written by Modern Orthodox scholars led by R. Isadore Epstein), the term “min” refers specifically to “either a heathen bigot or fanatic.” The reason that a Torah written by a pagan is forbidden to read is because the “Torah scroll may have been written for an idolatrous purpose.”
R. Adin Steinsaltz explains that the “heretic” in the Talmud probably refers to someone who was a member of the Christian faith. Since the element of intentionality is significant and has profound halachic importance whenever the scribe writes any of the Divine Names, we fear that the Jewish Christian scribe most likely associated God’s Name with Jesus and the Trinity.
The Jerusalem Talmud lists that twenty-four types of minim (heretics) existed in the first and subsequent centuries that followed the destruction of the Second Temple. Alleged heretical beliefs included many types of belief:
(1) Anyone who denies God’s unity.
(2) Dualism in all of its forms (Gnostic, Trinitarian, or Zoroastrian)
(3) Denial of Providence
(4) Denial of Israel’s mission to the world
(5) Denial of salvation
(6) Denial of Resurrection
(7) Denial of a Messianic Redeemer or Messianic Age
Maimonides himself viewed minut as atheism, or anyone who denied the existence in the theological doctrine of creatio ex nihilo “creation from nothing”) or the notion that man requires an intermediary to worship God (MT Hilchot Teshuva 3:7).
Contrary to many Talmudists—both ancient and modern—there is an impressive list of Jewish thinkers who rejected the belief in creatio ex nihilo and argued that bara does not necessarily mean “creation from nothing.” Ibn Ezra and even Maimonides both felt that creatio ex nihilo need not necessarily be implied by the verb bara. The 15th-16th century Jewish philosopher, R. Josef Albo concluded that creatio ex nihilo is not a fundamental principle of the Torah.
Maimonides’ own views are far more nuanced than one might realize for he himself did not really believe in physical resurrection—a point that many of Maimonides’ greatest critics suggested. If you wish to familiarize yourself with this discussion, see Marc B. Shapiro’s brilliant book, The Limits of Orthodox Theology: Maimonides’ Thirteen Principles Reappraised (Portland Or; Littman Library, 2004), pp. 71-78; 132-157. Any Orthodox person reading this book must come to the inevitable conclusion that beliefs have always varied throughout Jewish history and that any attempt to create a Procrustean theology that consists of one voice is wrong-headed and foolish. 
Part 3: The “Heretic’s Torah Scroll”
It is astounding in my view how any responsible Orthodox thinker could think that profiting from a “heretical” Torah scroll is considered permitted—especially when one can make a tidy $15,000 profit selling such a scroll to a “heretical” place of worship such as a Conservative or Reform synagogue. One gets the distinct impression from your original letter that whenever there is a profit to be made, one can sell anything to the “heretic,” for all money is kosher.
Such an attitude is not God-centered, but it is mammon centered.
Halacha provides an interesting analogy to our situation: A person is forbidden by law to sell a forbidden unkosher mixture of meat and milk, or for that matter—any forbidden substance to a Jew. Aside from the fact that one is placing “a stumbling block before the blind” (Lev. 19:14). With regard to your original question, it seems to me that you have no right—ethical or religious—to financially benefit from a Torah scroll that you consider to be defective by selling it to members of a “heretical” Jewish community. The very use of such terminology when used regarding Jews of different beliefs is potentially incendiary and divisive; such attitudes lead only to more sinat hinnum.
Since Conservative or Reform Jews and their rabbis are clearly not the heretics that the Talmud was originally speaking of. I suggest to you that it is permitted to sell a defective Torah scroll provided you inform the purchaser that it needs repair. Heresy is a complete non-issue here. In short, under no circumstances should you burn the Sefer Torah. If its errors cannot be corrected, I suggest you give the Torah to a skilled scribe who knows how to repair it.
Peter Schäfer’s new book, Jesus in the Talmud, takes umbrage with the old Christian view that asserts “min” to be invariably “Christian,” whenever it appears in the Talmud.
 Cf. BT Sanhedrin 38b-39a; BT Sanhedrin 91a & 91a. Incidentally, Shapiro completely demolishes the responsa of R. Moshe Feinstein who alleges that all Conservative and Reform rabbis are “heretics” and that it is even forbidden to answer “Amen!” to their prayers. See Igrot Moshe YD Vol.1, Responsa 172; OH Vol. 4: 91. Like Rabbi Schnersohn and R. David Bleich, R. Feinstein believed anyone who rejected Maimonides’ Thirteen Principles was and is a “heretic.”