- 29 -
evidence, appeared to be trustworthy. Thus, we proceed to
determine the value of the gemstones.
Section 1.170A-1(c)(1), Income Tax Regs., states that,
except for certain adjustments not relevant here,13 a charitable
contribution of property is to be valued at the fair market value
of the property at the time of the contribution. "Fair market
value" is defined as "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." Sec. 1.170A-1(c)(2),
Income Tax Regs. A sale of the same property within a short
period of time prior to the valuation date has been described as
reliable evidence of value. Chiu v. Commissioner, 84 T.C. 722,
734 (1985); Hinkel v. Motter, 39 F.2d 159 (D. Kan. 1930).
Respondent argues that Mr. Hemmings has not established the
fair market value of the gemstones on the date of contribution.
Mr. Hemmings does not rely on either of the appraisals other than
to corroborate the facts concerning his acquiring the gems.
13 In determining the amount of a charitable contribution
of property, the fair market value of the property must be
reduced by, inter alia, the amount of gain which would not have
been long-term capital gain if the property contributed had been
sold by the taxpayer at its fair market value at the time of
contribution. Sec. 170(e)(1)(A); sec. 1.170A-1(c)(1), Income Tax
Regs. The Hemmingses do not assert that the fair market value of
the gemstones at the time of contribution exceeded their basis
($150,000). To the extent the fair market value did exceed
basis, such excess would have no impact on the amount of the
allowable charitable contribution deduction because of the
aforementioned rule.
Page: Previous 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 NextLast modified: May 25, 2011