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EAK5455
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Joined: 08 Jan 2010
Location: United States
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Posts: 107

Posted: 11 Jan 2010 at 16:11 \| IP Logged

Whenever appreciated property is contributed to a
charitable organization, the property is valued at FMV if
a hypothetical sale of said asset would result in a long-term capital gain. Otherwise, the property is valued at the taxpayer's basis.

In the case of land held for 10 years and then
contributed at $11,000 above the taxpayer's basis, the
land would most definitely result in a long-term capital
gain if the taxpayer would sell the land rather than
contribute it to the church.

Therefore, the FMV of the land ($25,000) is used as the
basis for the charitable contribution deduction rather
than cost basis.

Furthermore, this contribution is limited to a 30% of AGI limitation. Because the FMV of $25,000 is less than the 30% AGI limitation
($27,000), the entire 25,000 is allowed as an itemized deduction.

brightspark312
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Joined: 14 Dec 2009
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Posted: 11 Jan 2010 at 16:25 \| IP Logged

Thanks EAK5455...It seems the material on Becker is not complete. Found what you mentioned on Wiley.

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iheartpeter
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Joined: 17 Mar 2009
Location: United States
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Posts: 274

Posted: 12 Jan 2010 at 18:12 \| IP Logged

Does that mean that this rule is completely wrong:

The deduction for contributed property is usually measured by the lesser of the property's basis or its fair value market at the time the contribution is made.

Because anytime the basis is less than FMV, then there would be capital gain.

Would you only use basis on property that was held for less than a year?

Thanks!

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EAK5455
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Joined: 08 Jan 2010
Location: United States
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Posts: 107

Posted: 12 Jan 2010 at 20:08 \| IP Logged

That rule is not quite right. If property is held for less
than 12 months than it will be considered short term and if
the sale of the asset would result in capital gain, then
the taxpayer's basis would be used to value the asset.

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