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?

Editor’s Note: The 50/60 percent AGI limits discussed below were increased to 100 percent for the 2020 and 2021 tax years in response to the COVID-19 pandemic.

If an individual makes a charitable contribution to a public charity of real property or intangible personal property, the sale of which would have resulted in long-term capital gain,  he is generally entitled to deduct the full fair market value of the property, but the deduction for the gift is limited to the lesser of 30 percent of adjusted gross income or the unused portion of the 60 percent (50 percent prior to 2018) limit (see Q 9065).¹ See Q 9068 for the rules that apply to gifts of tangible personal property, and Q 9069 regarding gifts to private foundations.

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 2024, Mr. Copeland had adjusted gross income of $600,000. He made a charitable contribution of long-term capital gain stock worth $200,000 to his church. His deduction is limited to $180,000 (30 percent of $600,000). In 2025, Mr. Copeland’s adjusted gross income is $700,000. He contributes $100,000 worth of long-term capital gain bonds to the church. He may deduct $120,000 in 2025 ($100,000 plus $20,000 carried forward from 2024), since the total does not exceed 30 percent of his adjusted gross income for 2025 ($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 he does so, the income percentage limit for the contribution is increased to 60 (or 50) 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 is 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 (e.g., short-term capital gain), 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.

Special rules apply to charitable contributions of S corporation stock in determining whether gain on the stock would have been long-term capital gain if the stock were sold by the taxpayer.⁶

Donors making charitable contributions of the long-term capital gain portion of futures contracts must mark the contracts to market as of the dates the contracts are transferred to the donee and recognize the accrued long-term capital gains as income.⁷ The amount of taxable gain or deductible loss recognized by the transferor at the time of the charitable transfer equals the difference between the fair market value of the futures contract at the time of the transfer and the transferor’s tax basis in the futures contract, as adjusted under IRC Section 1256(a)(2), to account for gains and losses already recognized in prior tax years under the mark to market rules.⁸

Taxpayers who transferred appreciated stock to charitable organizations in the midst of an ongoing tender offer and merger were taxed on the gain on the stock under the “anticipatory assignment of income doctrine” where the charitable gifts occurred after the taxpayers’ interests in a corporation had ripened into rights to receive cash.⁹ But where taxpayers assigned warrants to four charities after receiving a letter announcing that all issued and outstanding stock of the company would be purchased, the Tax Court held that under Revenue Ruling 78-197¹⁰ the Service could treat the proceeds of the sales of the warrants by the charities as income to the donors only if at the time the assignments took place, the charitable donees were legally bound or could be compelled to sell the warrants.¹¹

A taxpayer who donated stock to a supporting organization, where the voting rights had been transferred for a business purpose to a third party many years ago, was permitted to claim a charitable deduction.¹²