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GIFTS OF MONEY AND PROPERTY(c) Special Rules of InapplicabilityThis deduction reduction rule does not apply to reduce the amount of the charitablecontribution when, by reason of the transfer of the contributed property,ordinary income or capital gain is recognized by the donor in the same tax yearin which the contribution is made. 37 Thus, if recognition of the income or gainoccurs in the same tax year in which the contribution is made, this rule is inapplicablewhen income or gain is recognized upon:• the transfer of an installment obligation to a charitable organization, 38• the transfer of an obligation issued at a discount to a charitable organization,39 or• the assignment of income to a charitable organization. 40Also, this deduction rule does not apply to a charitable contribution by anonresident alien individual or a foreign corporation of property, the sale orother disposition of which within the United States would have resulted in gainthat is not effectively connected with the conduct of a trade or business in theUnited States. 41§ 4.5 CERTAIN GIFTS OF CAPITAL GAIN PROPERTYIn general, contributions of long-term capital gain property to public charitableorganizations are deductible, with the federal income tax charitable contributiondeduction computed on the basis of the fair market value of the property. 42When contributions are made to a charitable organization that is not a publiccharitable organization, however, a deduction reduction rule applies. Nonetheless,this rule does not apply with respect to gifts to:• A private operating foundation• A pass-through foundation• A common fund foundation 43(a) General Deduction Reduction RuleThe general deduction reduction rule is as follows: When a charitable gift of capitalgain property is made, the amount of the charitable deduction that would otherwisebe determined must be reduced by the amount of gain that would havebeen long-term capital gain if the property contributed had been sold by the donor37 Reg. § 1.170A-4(a), last paragraph.38 IRC § 453(d).39 IRC § 454(b).40 Reg. § 1.170A-4(a), last paragraph.41 Reg. § 1.170A-4(c)(5), last sentence. This type of gain is the subject of IRC § 871(a) or § 881.42 See § 2.3.43 IRC § 170(e)(1)(B)(ii), by cross-reference to the three types of private foundations referenced in IRC§ 170(b)(1)(E). The law concerning these three entities is discussed in § 3.4. 132