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GIFTS OF MONEY AND PROPERTYof inventory of the venture and thus are forms of ordinary income property. 28This position, however, is being rejected in the courts. 29(b) Deduction Reduction RuleOften, as noted, the rule for the deduction arising from a gift of property to acharitable organization is that the amount of the deduction is equal to the amountof the fair market value of the property at the time of the gift. 30 In the case of acharitable gift of ordinary income property, however, the amount of the charitablecontribution for the gift of the property must be reduced by the amount ofgain that would have been recognized as gain, which is not long-term capitalgain, if the property had been sold by the donor at its fair market value, determinedat the time of the contribution to the charitable organization. 31 The amountof gain that is taken into account in making this reduction is sometimes termedthe ordinary income element.Consequently, this deduction reduction rule basically means that a donor’sdeduction for a contribution of an item of ordinary income property to a charitableorganization is confined to the donor’s basis in the property. The amountthat is deductible is the fair market value of the property, reduced by the amountthat is equal to the ordinary income element. 32 In one case, a company that contributedits film library to a charitable organization was advised by the IRS thatits charitable contribution deduction was zero, in that the library was akin to lettersand memoranda and, thus, not a capital asset. Because the costs associatedwith establishing the library were expensed as incurred, the basis in the propertywas zero. The value of the property contributed had to be reduced by its fullamount. 3328 In one instance, the IRS ruled that an individual, who purchased books at a volume discount from a companylocated in a country where the retail price was legally fixed and then imported them into the U. S., warehousedthe books for a period just beyond the capital gain holding period, and then donated them to charitable organizations,was engaged in an activity tantamount to the activities of a book dealer, so that the books were heldto be ordinary income property. Rev. Rul. 79-419, 1979-2 C.B. 107. In another instance, the IRS ruled that anindividual who raised ornamental plants as a hobby, and each year donated a large number of them to variouscharitable organizations, was engaged in activities substantially equivalent to those of commercial dealers, sothat the contributed property was held to be ordinary income property. Rev. Rul. 79-256, 1979-2 C.B. 105. TheIRS also so ruled in an instance involving an individual, not an art dealer, who purchased a substantial part ofthe total limited edition of a particular lithograph print and donated the prints to various art museums. Id.29 E.g., Pasqualini v. Commissioner, 103 T.C. 1, 5 (1994) (Christmas cards acquired for purpose of giving themto a religious organization held to be capital assets); Sandler v. Commissioner, 52 T.C.M. (CCH) 563 (1986)(gravesites acquired to donate to a church three times in five years held to be capital assets, even though donorwas engaged in business of selling like property commercially); Hunter v. Commissioner, 51 T.C.M. (CCH)1533 (1986) (limited edition prints acquired for charitable giving purposes held to be capital assets). In contrastis Lindsley v. Commissioner, 47 T.C.M. (CCH) 540 (1983) (parcels of land contributed by real estate brokerto charitable organization held to be ordinary income property).30 IRC § 170(a); Reg. § 1.170A-1(c)(1).31 IRC § 170(e)(1)(A); Reg. § 1.170A-4(a)(1).32 In one instance, this charitable deduction reduction rule was held inapplicable because the property involvedwas held for at least one year, the property was a capital asset (and thus not, as the IRS contended, held primarilyfor sale to customers in the ordinary course of a business), and any gain that it would have generated wouldhave been long-term capital gain. Duval v. Commissioner, 68 T.C.M. (CCH) 1375 (1994).33 Tech. Adv. Mem. 200119005. 130