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§ 4.5 CERTAIN GIFTS OF CAPITAL GAIN PROPERTYat its fair market value, determined at the time of the contribution, when the gift isto or for the use of a private foundation (with the above three exceptions). 44In these circumstances, if the contributed property is capital gain property,the charitable deduction that would otherwise be determined must be reducedby the amount of the unrealized appreciation in value. The charitable deductionunder these rules is confined to the basis in the property.EXAMPLE 4.6X owned a painting that he purchased for $25,000 and that had a value of $50,000. In X’shands, the property was long-term capital gain property. X contributed this painting to a privatenonoperating foundation. X’s charitable deduction computed under this rule was $25,000. Ifthe painting had been donated to a private operating foundation, however, the charitablededuction (to the extent of this rule) would have been $50,000.This rule applies:• Irrespective of whether the donor is an individual or a corporation• Irrespective of whether the charitable contribution is made to or for theuse of a charitable organization 45• To a gift of property prior to application of the appropriate percentagelimitation(s) 46(b) Qualified Appreciated StockAn exception to the deduction reduction rule is that it does not apply in the caseof a contribution of qualified appreciated stock. 47 That is, when this exception isapplicable, the charitable deduction for a contribution of stock to a private foundationis based on the fair market value of the stock at the time of the gift.Basically, the term qualified appreciated stock means any stock• for which (as of the date of the contribution) market quotations arereadily available on an established securities market, and• that is capital gain property. 48In the sole case on the point, a court held that stock contributed to a privatefoundation did not give rise to a charitable deduction based on its fair marketvalue, because the stock did not constitute qualified appreciated stock. 49 Thestock involved was that of a bank holding company. The shares were not listedon the New York Stock Exchange, the American Stock Exchange, or any city orregional stock exchange, nor were the shares regularly traded in the national orany regional over-the-counter market for which published quotations are available.The shares were not those of a mutual fund. A brokerage firm occasionally44 IRC § 170(e)(1)(B)(ii); Reg. § 1.170A-4(b)(2)(i).45 See § 10.2.46 See Chapter 7.47 IRC § 170(e)(5)(A).48 IRC § 170(e)(5)(B).49 Todd v. Commissioner, 118 T.C. 334 (2002). 133