9066 / When is the deduction for charitable donations taken?

Example: If a donor creates a charitable remainder trust and funds it with a piece of artwork, the donor may not take a charitable income tax deduction for the contribution to the charitable remainder trust until the year the trustee sells the artwork.

This rule does not apply to gifts of undivided present interests, or to gifts of future interests in real property or in intangible personal property.³ A grant of stock options by a company to a charitable trust resulted in a deduction in the year in which the options were exercised.⁴ Where real estate was transferred to a charity and subject to an option to repurchase, the IRS determined that fair market value under IRC Section 170 was equal to the value of the property upon the expiration of the option.⁵ A fixture that is to be severed from real property is treated as tangible personal property.⁶ The deduction for a charitable contribution made by an accrual basis (see Q 9045) S corporation is properly passed through to shareholders and taken in the year that the contribution is actually paid.⁷

See Q 9071 for an explanation of the treatment given to gifts of partial interests.