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Contributions of stock to private foundations.

In general, if a donor makes a gift of appreciated property to a private foundation, the charitable contribution deduction is reduced by the gain that would have been taxable had the property been sold. However, Sec. 170(e)(5) allows a deduction at fair market value (FMV) for contributions of qualified appreciated stock to private foundations.

Qualified appreciated stock is any stock of a corporation that is publicly traded and would result in long-term capital gain if sold. The FMV deduction is not available if more than 10% of the stock of any one corporation is contributed by the donor and the donor's family members.

This exception for gifts of publicly traded stock was added to the Code by the Deficit Reduction Act of 1984, with a termination date of Dec. 31, 1994. Prior law provided a deduction of only the "tax basis" of such stock contributions, and this is the rule that would apply again if Congress does not act.

Rep. Andrew Jacobs (D-Ind.) has introduced legislation, HR 2418, that makes this rule permanent, in addition to other provisions favorable to private foundations. These other provisions include changes to the due date for first quarter estimated tax payments by private foundations, and treating private foundation grants to certain foreign organizations as qualifying distributions.

In the Revenue Reconciliation Act of 1993, Congress began to redress the balance between gifts of cash and those of property by eliminating gifts of appreciated property as AMT preference items. This will likely encourage more charitable gifts of property. Gifts to private foundations could similarly be encouraged by making the current provisions of Sec. 170(e)(5) permanent.

From Siobhan Rausch and John Gardner, J.D., Washington, D.C.
COPYRIGHT 1994 American Institute of CPA's
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1994, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

Article Details
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Author:Gardner, John H.
Publication:The Tax Adviser
Article Type:Brief Article
Date:Apr 1, 1994
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