9071 / Can a deduction be taken for a charitable contribution of less than the donor’s entire interest in property?

Usually not. Generally, a taxpayer may not deduct a charitable contribution that is less than the entire interest in property unless the contribution is made in trust. (A deduction of a partial interest will be allowed to the extent a deduction would be allowed if the interest had been transferred in trust.¹) However, a taxpayer may deduct contributions of partial interests if they are made to each of several charities, with the result that the entire interest in the property has been given to charitable organizations. An individual may make a gift of a partial interest in property if that is the individual’s entire interest, but not if partial interests were created to avoid the application of the rule prohibiting gifts of less than the individual’s entire interest.²

Exceptions: A deduction is allowed for a contribution of less than the donor’s entire interest in property in the following instances:

(1)   The taxpayer donates an irrevocable remainder interest in a personal residence or farm;³

(2)   The taxpayer makes a qualified conservation contribution;⁴ or

(3)   The taxpayer donates an undivided portion of his entire interest.⁵ An undivided portion is a fraction or percentage of each and every substantial interest or right owned by the donor in property and the fraction or percentage extends over the entire term of the donor’s interest in the property and in other property into which that property is converted.⁶ The right to possession of an undivided portion of the taxpayer’s entire interest has been held sufficient to constitute a charitable gift, even where the donee did not actually choose to take possession.⁷ The possibility that a charity’s undivided fractional interest may be divested upon the occurrence or nonoccurrence of some event has been determined not to defeat an otherwise deductible contribution where the possibility is deemed so remote as to be negligible.⁸

The IRS has also found that a charitable gift of an “overriding royalty interest” or a “net profits interest” in an oil and gas lease did not constitute an undivided portion of the donor’s entire interest in an oil and gas lease where the donor owned a working interest under the lease.⁹

The IRS has ruled privately that a donor’s transfer of a life insurance policy to a charity, where the donor retained bare legal title, was not a retention of a substantial interest for purposes of the partial interest rule. Thus, the donor did not violate the partial interest rule, and was allowed to claim the charitable contribution deduction on the first day following the end of the 30-day cancellation period.¹⁰

In a case involving the contribution of a patent to a qualified charity, the IRS found that no deduction is allowed if: (1) the taxpayer retains any substantial right in the patent; or (2) the taxpayer’s contribution of a patent is subject to a conditional reversion, unless the likelihood of the reversion is so remote as to be negligible. On the other hand, a contribution of a patent subject to a license or transfer restriction will be deductible, but the restriction reduces what would otherwise be the fair market value of the patent at the time of the contribution and, therefore, reduces the amount of the charitable contribution.¹¹

A charitable deduction is not allowed for a contribution of an undivided portion of the donor’s entire interest in tangible personal property unless, before the contribution, all interests in the property were held by the donor or the donor and the charity. In the case of any additional contribution of interests in the same property, the fair market value (FMV) of such contributions will be equal to the lesser of (1) the FMV at the time of the initial fractional contribution, or (2) the FMV at the time of the additional contribution.¹²

Example. Mark contributed 10 percent of a painting valued at $100,000 to an art museum in 2024
(a related use gift). The charitable deduction for the 10 percent interest was $10,000 in 2024. In 2025, Mark contributes another 10 percent interest in the painting to the art museum when the painting is valued at $110,000. However, for charitable deduction purposes, the fair market value of the painting cannot exceed the $100,000 value at the time of the initial contribution. Therefore, the charitable deduction is limited to $10,000 (10 percent of $100,000) in 2024.

The charitable deduction for a contribution of an undivided portion of the donor’s entire interest in tangible personal property is recaptured (plus interest) if the donor does not contribute all of the remaining interests in the property to charity within 10 years of the initial fractional contribution or before death, whichever is earlier. Recapture is also required if the charity did not have substantial physical possession or make related use of the property during that period. The income tax on the recaptured amount is increased by 10 percent of the amount recaptured.¹³