The Tax Law of Charitable Giving. Bruce R. Hopkins

unavoidable function of the tax administration and judicial process” (Nestle Holdings, Inc. v. Commissioner, 94 T.C. 803, 815 (1990)). It was held that the fair market valuation standard is applicable in the context of charitable giving by trusts (see § 7.22) (Green v. United States, 2015 WL 1482508), but that decision was reversed, with the appellate court holding that the deduction amount is confined to the donor's adjusted basis in the properties, with the lower court's holding held to be contrary to the language of the statute (IRC § 642(c)(1)) and effectively allowing a “duplicative tax benefit” (Green v. United States, 880 F.3d 579 (10th Cir. 2018)). It is a “well-established rule that a gift of appreciated property does not result in income to the donor” (Greene v. United States, 13 F.3d 577, 584 (2d Cir. 1994)).

      17 17 See § 3.4(b).

      18 18 Reg. § 1.170A-4(b)(1).

      19 19 See § 7.3.

      20 20 This type of stock, known as section 306 stock, is described in IRC § 306(a). The IRS summarized the tax treatment of a charitable gift of section 306 stock in Priv. Ltr. Rul. 8930001. See § 7.8.

      21 21 IRC § 341.

      22 22 IRC § 1248.

      23 23 IRC § 1231(b).

      24 24 IRC § 170(e)(1), last sentence; Reg. § 1.170A-4(c)(4). The recapture rules are the subject of IRC §§ 617(d)(1), 1245(a), 1250(a), 1252(a), and 1254(a).

      25 25 Reg. § 1.170A-4(b)(1).

      26 26 See § 3.3.

      27 27 E.g., Pasqualini v. Commissioner, 103 T.C. 1, 5 (1994).

      28 28 In one instance, the IRS ruled that an individual, who purchased books at a volume discount from a company located in a country where the retail price was legally fixed and then imported them into the United States, warehoused the books for a period just beyond the capital gain holding period, and then donated them to charitable organizations, was engaged in an activity tantamount to the activities of a book dealer, so that the books were held to be ordinary income property (Rev. Rul. 79-419, 1979-2 C.B. 107). In another instance, the IRS ruled that an individual who raised ornamental plants as a hobby and each year donated a large number of them to various charitable organizations was engaged in activities substantially equivalent to those of commercial dealers, so that the contributed property was held to be ordinary income property (Rev. Rul. 79-256, 1979-2 C.B. 105). The IRS also so ruled in an instance involving an individual, not an art dealer, who purchased a substantial part of the total limited edition of a particular lithograph print and donated the prints to various art museums (id.).

      29 29 E.g., Pasqualini v. Commissioner, 103 T.C. 1, 5 (1994) (Christmas cards acquired for purpose of giving them to a religious organization held to be capital assets); Sandler v. Commissioner, 52 T.C.M. (CCH) 563 (1986) (grave sites acquired to donate to a church three times in five years held to be capital assets, even though donor was engaged in business of selling like property commercially); Hunter v. Commissioner, 51 T.C.M. (CCH) 1533 (1986) (limited edition prints acquired for charitable giving purposes held to be capital assets). In contrast is Lindsley v. Commissioner, 47 T.C.M. (CCH) 540 (1983) (parcels of land contributed by real estate broker to charitable organization held to be ordinary income property).

      30 30 IRC § 170(a); Reg. § 1.170A-1(c)(1).

      31 31 IRC § 170(e)(1)(A); Reg. § 1.170A-4(a)(1). E.g., Grainger v. Commissioner, 116 T.C.M. (CCH) 107, 111, note 5 (2018).

      32 32 In one instance, this charitable deduction reduction rule was held inapplicable because the property involved was held for at least one year, the property was a capital asset (and thus not, as the IRS contended, held primarily for sale to customers in the ordinary course of a business), and any gain that it would have generated would have been long-term capital gain (Duval v. Commissioner, 68 T.C.M. (CCH) 1375 (1994)).

      33 33 Tech. Adv. Mem. 200119005.

      34 34 See § 2.4.

      35 35 See § 8.2.

      36 36 See ch. 5.

      37 37 Reg. § 1.170A-4(a), last paragraph.

      38 38 IRC § 453(d).

      39 39 IRC § 454(b).

      40 40 Reg. § 1.170A-4(a), last paragraph.

      41 41 Reg. § 1.170A-4(c)(5), last sentence. This type of gain is the subject of IRC § 871(a) or § 881. A for-profit corporation, intending to contribute fully depreciated real property (described in IRC § 1250) to one or more charitable organizations, represented to the IRS that the charities will have a basis in the gift property equal to the corporation's basis in the property at the time of transfer (IRC § 1015(a)). Dispositions of property of this nature can cause some of the resulting gain to be treated as ordinary income (IRC § 1250(a)). This rule does not apply, however, where the disposition is a gift (IRC § 1250(d)). Under these circumstances, the IRS ruled that the charitable deduction attributable to the value of the contribution will not be reduced pursuant to a special rule, which causes the deduction to be reduced by 20 percent of the accumulated depreciation of the property (IRC § 291(a)(1)) (Priv. Ltr. Rul. 201318003).

      42 42 See § 23.1.

      43 43 IRC § 170(e)(1)(B)(ii), by cross-reference to the three types of private foundations referenced in IRC § 23.1)(1)(F). The law concerning these three entities is discussed in § 2.4.

      44 44 IRC § 170(e)(1)(B)(ii); Reg. § 1.170A-4(b)(2)(i).

      45 45 See § 8.2.

      46 46 See ch. 5.

      47 47 IRC § 170(e)(5)(A).

      48 48 IRC § 170(e)(5)(B).

      49 49