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reduced contributions of certain types of property to
charitable institutions. In particular, those charitable
organizations that provide food, clothing, medical
equipment, and supplies, etc., to the needy and disaster
victims have found that contributions of such items to those
organizations were reduced.
Congress believed that it was desirable to provide a
greater tax incentive than in prior law for contributions of
certain types of ordinary income property which the donee
charity uses in the performance of its exempt purposes.
However, Congress believed that the deduction allowed should
not be such that the donor could be in a better after-tax
situation by donating the property than by selling it.
[Id., 1976-3 C.B. (Vol. 2) at 684-685.]
The Committee Report thus reflects Congressional intent to allow a
modified deduction, in limited situations, consisting of the
taxpayer's basis plus a fraction of the unrealized ordinary income
inherent in the donated property, but subject to an overall
limitation of twice adjusted basis.
Section 1.170A-1(c), Income Tax Regs., deals with the valuation
of a charitable contribution in property. Section 1.170A-1(c)(2)
and (3) provide:
(2) The fair market value is the price at which the
property would change hands between a willing buyer and
a willing seller, neither being under any compulsion to
buy or sell and both having a reasonable knowledge of
relevant facts. If the contribution is made in property
of a type which the taxpayer sells in the course of his
business, the fair market value is the price which the
taxpayer would have received if he had sold the
contributed property in the usual market in which he
customarily sells, at the time and place of the
contribution and, in the case of a contribution of goods
in quantity, in the quantity contributed. The usual
market of a manufacturer or other producer consists of
the wholesalers or other distributors to or through whom
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