Contents

PERCENTAGE LIMITATIONSAs discussed elsewhere, 44 when an individual makes a contribution of anitem of tangible personal property, that has appreciated in value, to a publiccharitable organization, but the public charity does not use the property for apurpose that is related to its tax-exempt purposes, the donor must reduce thededuction by all of the capital gain element. 45 (The capital gain element is the portionof the proceeds that would have been long-term capital gain had the propertybeen sold.) Once the (potentially) deductible amount is determined underthis rule, the amount is then subjected, for purposes of determining the actualcharitable contribution deduction, to the 50 percent limitation. 46Also, as discussed below, 47 there is a special rule by which the charitablecontribution deduction for a gift of capital gain property can become subject tothe 50 percent limitation rather than a 30 percent limitation (to which the deductionfor gifts of that type of property are generally subject).There are, then, five instances in which a charitable contribution deductionmay be limited by the 50 percent limitation:1. Gifts of money2. Gifts of ordinary income property (property the sale of which would produceordinary income)3. Gifts of short-term capital gain property (property the sale of whichwould produce short-term capital gain)4. Gifts of capital gain property for which the charitable deduction wasreduced by the amount of the capital gain element because the charitabledonee put the property to an unrelated use 485. Gifts of capital gain property as to which a special election is made(b) Carryover RulesIn general, the excess of:The amount of the charitable contribution or contributions of money made byan individual in a contribution year to one or more public charitable organizationsdivided by:50 percent of the individual’s contribution base for the contribution yearis treated as a charitable contribution paid by the individual to a public charitableorganization, subject to the 50 percent limitation, in each of the five tax yearsimmediately succeeding the contribution year, in order of time. 49 Thus, for federalincome tax purposes, an amount paid to a charitable organization in oneyear is, when the carryover rules are applied, treated as paid to a charitableorganization in a subsequent year.44 See § 4.6.45 IRC § 170(e)(1)(B)(i).46 IRC § 170(b)(1)(C)(i).47 See § 7.7.48 See § 3.5.49 IRC § 170(d)(1); Reg. § 1.170A-10(b)(1). 194