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GIFTS OF MONEY AND PROPERTYEXAMPLE 4.1X, an individual, makes a contribution of $1,000 to a charitable organization during calendaryear 2005. Consequently, X has a federal income tax charitable contribution deduction basedon the $1,000 amount for that year.A gift of money in the form of currency of a country other than the U.S.(such as a contribution of a coin collection) may be treated as a gift of property.When a contribution is made in the form of money, there is no valuationproblem, as there can be in connection with contributions of property. Gifts ofmoney are nonetheless subject to the substantiation requirements. 3§ 4.2 GIFTS OF PROPERTY IN GENERALThe law of charitable giving becomes more complex in the case of a donor whomakes a contribution of property, rather than a contribution of money.At the outset, a determination must be made as to the value of the property. 4This value is known as the fair market value of the property. The process of valuingproperty for these purposes is discussed elsewhere. 5In many instances, the federal income tax charitable contribution deduction forcontributions of property is based upon the fair market value of that property.There are instances, however, when that value must be reduced for purposes ofcomputing the charitable deduction. Generally, when this reduction in the deductionis required, the amount that is deductible is the amount equal to the donor’sbasis in the property. The deduction reduction rules are discussed elsewhere. 6Because the deduction for a gift of property is often based on the fair marketvalue of the property, a donor can benefit when the property has increased invalue since the date on which the donor acquired the property. The property issaid to have appreciated in value; property in this circumstance is known as appreciatedproperty. When certain requirements are satisfied, a donor is entitled to acharitable deduction based on the full fair market value of the property.This rule—allowance of the charitable deduction based on full value of anitem of property—is one of the rules in the tax law that is most beneficial todonors. It is particularly so when one considers that the donor in this circumstanceis not required to recognize any gain on the transfer. 7 The gain is theamount that would have been recognized had the donor sold the property; it issometimes referred to as the appreciation element.The donor’s ability to have a charitable deduction based upon the fair marketvalue of the property and not recognize gain on the appreciation element in3 See § 21.1.4 Reg. § 1.170A-1(c)(1).5 See § 10.1.6 See §§ 4.4–4.6. In certain circumstances, the charitable deduction may be as much as twice basis (see § 9.3).7 E.g., Campbell v. Prothro, 209 F.2d 331 (5th Cir. 1954); White v. Brodrick, 104 F. Supp. 213 (D. Kan. 1952);Rev. Rul. 55-531, 1955-2 C.B. 520; Rev. Rul. 55-275, 1955-1 C.B. 295; Rev. Rul. 55-138, 1955-1 C.B. 223,modified by Rev. Rul. 68-69, 1968-1 C.B. 80. 126