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§ 4.6 GIFTS OF PROPERTY FOR UNRELATED USEIn these circumstances, when the contributed property is capital gain property,the charitable deduction that would otherwise be determined must bereduced by the amount of the unrealized appreciation in value. 56This rule applies:• Irrespective of whether the donor is an individual or a corporation• Irrespective of the tax classification of the charitable organization that isthe donee (for example, public or private charity) 57• Irrespective of whether the charitable contribution is made to or for theuse of a charitable organization 58• To a gift of tangible personal property prior to application of the appropriatepercentage limitation(s) 59When tangible personal property is put to a related use by the recipient charitableorganization, the charitable deduction is based on the fair market value ofthe property (that is, there is no deduction for the capital gain element).(b) Unrelated UseThe term unrelated use means a use of an item of contributed property:• by a charitable organization that is not related to the purpose or functionconstituting the basis of the tax exemption for the charitable organization, or• by a governmental unit that is for a purpose other than an exclusivelypublic purpose. 60EXAMPLE 4.7X 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 aneducational institution, which used the painting for educational purposes by placing it in itslibrary for display and study by art students. Because this use was a related use, X’s charitablededuction computed under this rule was $50,000. aaReg. § 1.170A-4(b)(3)(i).If a charitable donee sells an item of tangible personal property donated toit, this deduction reduction rule is triggered, because sale of the property is not arelated use of the property. Thus, donors of tangible personal property shouldexercise caution when contemplating a gift of the property, particularly whenthe donor knows the property is going to be promptly sold (such as a gift to supportan auction).56 For this purpose, a fixture that is intended to be severed from real property is treated as tangible personal property.Reg. § 1.170A-4(b)(2), last sentence.57 See § 3.3.58 See § 10.3.59 See Chapter 7.60 Reg. § 1.170A-4(b)(3)(i). See § 3.5. 135