8072 / Can an individual deduct the fair market value of appreciated real estate or intangible personal property such as stocks or bonds given to a charity?
A deduction denied because it exceeds 30 percent of the individual’s adjusted gross income may be carried over and treated as a contribution of capital gain property in each of the next five years.2
Example: In 2022, Jaclyn had adjusted gross income of $600,000. She made a charitable contribution of long-term capital gain stock worth $200,000 to her church. Her deduction is limited to $180,000 (30 percent of $600,000). In 2023, Jaclyn’s adjusted gross income is $700,000. She contributes $100,000 worth of long-term capital gain bonds to the church. She may deduct $120,000 in 2023 ($100,000 plus $20,000 carried forward from 2022), since the total does not exceed 30 percent of her adjusted gross income for 2023 ($210,000).
An individual may elect to take a gift of long-term capital gain property into account at its adjusted basis instead of its fair market value. If the taxpayer makes this election, the income percentage limit for the contribution is increased to 60 percent instead of 30 percent. However, such an election applies to all such contributions made during the taxable year.3 The election is generally irrevocable.4
If the charitable contribution consists of property that, if sold at the time of the contribution, would result in income that would not otherwise qualify for long-term capital gain treatment (such as short-term capital gain property), the deduction must be reduced by the amount of gain that would not be long-term capital gain.5 If the entire gain would be income other than long-term capital gain, the allowable deduction would be limited to the taxpayer’s adjusted basis in the contributed property.