The Tax Law of Charitable Giving. Bruce R. Hopkins

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The Tax Law of Charitable Giving - Bruce R. Hopkins


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purpose (related use) and a use that is not related to the donee organization's tax-exempt purpose (unrelated use).12

      The federal tax law places limitations on the deductibility of property that, if sold, would give rise to gain that is not long-term capital gain. This type of property, which is termed ordinary income property, includes short-term capital gain property.

      Federal tax law provides a rule requiring the modification of what would otherwise be the charitable deduction for a contribution of property that is ordinary income property.

      Examples of ordinary income property are:

       Property held by the donor primarily for sale to customers in the ordinary course of a trade or business (inventory)19

       A capital asset held for a period of time that is less than the period required to cause the property to become long-term capital gain property (short-term capital gain property)

       A work of art created by the donor

       A manuscript created by the donor

       Letters and memoranda prepared by or for the donor

       Stock acquired in a nontaxable transaction that, if sold, would generate ordinary income20

       Stock in a collapsible corporation that, if sold, would generate ordinary income21

       Stock in certain foreign corporations that, if sold, would generate ordinary income22

       Property used in a trade or business,23 treated as a capital asset, if gain would have been recognized, upon sale of the property by the donor at its fair market value at the time of the contribution, as ordinary income by reason of the application of recapture rules24

      This rule applies:

       Irrespective of whether the donor is an individual or a corporation

       Irrespective of the tax classification of the charitable organization that is the donee (for example, public or private charity)34

       Irrespective of whether the


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