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GIFTS OF MONEY AND PROPERTY• the percentage limitations, 12 and• compliance with the substantiation rules. 13§ 4.3 GIFTS OF LONG-TERM CAPITAL GAIN PROPERTYIN GENERALWhen a donor makes a contribution of long-term capital gain property to a publiccharitable organization, the charitable deduction is generally based on the fullfair market value of the property. 14 There generally is no need for the donor torecognize the capital gain element. 15 This rule is also generally applicable whenthe donee is a governmental entity.EXAMPLE 4.2Y, an individual, makes a contribution of 10 shares of publicly traded securities to a charitableorganization during calendar year 2005. These shares, which constitute long-term capital gainproperty in the hands of Y, have a total fair market value of $3,000. Consequently, Y has afederal income tax charitable contribution deduction based on the $3,000 amount for that year.The rule is not applicable when the donee is a charitable organization otherthan a public charitable organization. In that instance, the charitable deductiongenerally is confined to the donor’s basis in the property. 16§ 4.4 GIFTS OF ORDINARY INCOME PROPERTYThe federal tax law places limitations on the deductibility of property that, ifsold, 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 gainproperty.Federal tax law provides a rule requiring the modification of what wouldotherwise be the charitable deduction for a contribution of property that is ordinaryincome property.(a) Ordinary Income Property DefinedThe categories of property for charitable giving purposes are discussed elsewhere.17 Again, ordinary income property is property that has appreciated invalue, any portion of the gain on which would give rise to ordinary income (orshort-term capital gain) if the property had been sold by the donor at its fair12 See Chapter 7.13 See § 21.1.14 Reg. § 1.170A-1(c)(1).15 As one court stated (somewhat more expansively than is actually the law): “Congress, in an effort to encouragecontributions to charitable organizations, has seen fit to permit a donor to deduct the full value of any gift of appreciatedproperty without reporting as income from an exchange the appreciation in the value of the propertywhich is thereby transferred.” Sheppard v. United States, 361 F.2d 972, 977–78 (Ct. Cl. 1966). Also, it is a “wellestablishedrule that a gift of appreciated property does not result in income to the donor.” Greene v. United States,13 F.3d 577, 584 (2d Cir. 1994).16 See § 4.4(b).17 See § 2.12. 128