In what may be the start of the nation's biggest philanthropic business transaction in almost 30 years, the billion-dollar MacArthur Foundation agreed Tuesday to sell most of its vast insurance and real estate empire to avoid massive federal tax penalties.

The 11-member board of directors of the John D. and Catherine T. MacArthur Foundation approved a letter of intent to divest itself $700 million to $800 million in assets, including selling the Bankers Life and Casualty Co., one of the nation's largest health and accident insurance firms to the First Winthrop Corp., a Boston-based realty corporation.

The foundation, best known for the no-strings-attached grants it makes to "exceptionally talented individuals," is one of three or four philanthropies in the United States commanding assets of a billion dollars or more.

Though only five years old, it is required by a 1969 federal law to divest itself of excess business holdings by Nov. 30 or face tens of millions of dollars in tax penalties.

But J. Roderick MacArthur, son of the philanthropy's founders and the only board member to vote against the asset sale, assailed the decision as "a horror."

In a letter to fellow board members Tuesday and in a telephone conversation today, MacArthur denounced the proposed deal.

He said unnecessarily favorable terms to First Winthrop will cost the foundation as much as $200 million in proceeds.

"This deal will deny the foundation and the public weal hundreds of millions of dollars in funds which can never be recovered," his letter to the board said.

A foundation spokesman, however, said the board believes the sales terms "so far as we can see are the best." He asserted that despite the Nov. 30 divestiture deadline that the foundation was not selling the assets under duress.

The sale, if completed, would include commercial buildings in Manhattan, among them the 42-story Gulf & Western building. The transaction would not include multimillion-dollar residential properties in New York and substantial undeveloped prime acreage in Florida.

The real estate holdings, Bankers Life and Casualty and 12 other insurance companies were the principal holdings of the late John D. MacArthur, who died in 1978 at the age of 80.

A Chicagoan and brother of Charles MacArthur, the coauthor with Ben Hecht of "The Front Page," John MacArthur built a nearly bankrupt insurance company into one of the nation's largest. He was a master salesman who sold $1 policies through newspaper ads.

Since his death, the foundation has owned almost all the stock of the 13 insurance companies, holdings estimated to be worth about $300 million. The foundation owned the real estate outright.

In 1969, Congress passed legislation requiring foundations to divest themselves by Nov. 30, 1983, of closely held businesses in relationships similar to the MacArthur Foundation's relations with the 13 insurance firms.

Officials of the foundation, along with others in similar situations, testified before Congress in June in favor of legislation that would provide relief from the Nov. 30 deadline.

Roderick MacArthur said he believes the possibility of congressional passage is very high.

Therefore, he said, he did not see why the foundation had signed a letter of intent. He further criticized the terms of the proposed transactions, saying they would allow First Winthrop to back out, even on the last day before the sale, with no penalty.

The proposed sale appears to be the biggest divestiture since 1956, when the Ford Foundation, the nation's largest foundation, began divesting itself of Ford Motor Co. stock, a process that took 18 years.