Individuals considering gifts of appreciated property to charity should be aware that not all property donations are treated equally for income tax purposes. Depending on the class of property, prior use, the donor’s holding period and type of donee, the charitable contribution deduction could be based on fair market value, the donor’s tax basis or another metric – or disallowed entirely. Donors contemplating major non-cash gifts should consult with their advisors early in the process.

Appreciated Property -

With some exceptions, an individual’s deduction for a charitable gift of property held as a capital asset for more than one year generally is based on the property’s fair market value. In contrast, the deduction is limited to the lesser of fair market value and the donor’s tax basis if the donor’s holding period is one year or less, the property is ‘ordinary income’ property (such as inventory) or the donee is a private foundation other than an operating or ‘distributing’ foundation.

Originally Published in Private Asset Management in June, 2014.

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Topics:  Charitable Deductions, Charitable Donations, Fair Market Value, Patents, Property Valuation, Real Estate Transfers, Securities, Tax Basis

Published In: Finance & Banking Updates, Tax Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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