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SPECIAL GIFT SITUATIONS• A court considered a gift of gems to a museum, with the claimed charitablededuction based on a value of $80,680. Finding essentially for the government,the court concluded that the date-of-gift value of the gems was$16,800. The court, which delved deeply into the practices of the jewelrytrade, rejected the view that the gems should be valued by reference to theprices charged by jewelry stores for individual items of jewelry and heldthat the value should be based on the price that would have been paid by ajewelry store to a wholesaler, with the sales of the gems individually ratherthan in bulk. Despite the emphasis in the opinion on valuation, the courtwas influenced by the tax results attempted by the donor in this case. Thedonor held the gems just long enough to satisfy the long-term capital gainholding period requirements, claimed a charitable deduction that wasnearly five times the amount paid for the gift property, and purchased thegems after becoming motivated by tax shelter promotional material. 25• Two donors purchased gemstones over a three-year period and contributedthem to a museum approximately one year after the last of the purchases.A court found that the fair market value of the gems was the costof them to the donors. 26• A charitable deduction was claimed for gifts of gemstones and similaritems to a museum; a court found the transfers to be tax-motivated andfound the value of the items to be equal to the acquisition cost. 27• A donor contributed opals to a museum. A court confined the deductionamount to the donor’s cost, finding no evidence that there was anyincrease in value in the jewels since the time of their purchase. 28• Two donors contributed an opal to a university. They claimed a value of$70,000. The IRS contested this valuation. The court concluded that theopal had a value of $50,000, largely because the jewel was part of a set, sothat the separate gift diminished its value. 29Gifts of gems may be subject to the appraisal requirements. 30 Penalties applyto the overvaluation of property for tax purposes. 31 These penalties are frequentlyapplied in the context of gifts of gems.§ 9.3 INVENTORYSpecial federal tax rules govern charitable contributions of items of inventory ofa corporation. The term inventory means property that is stock in trade of a businessenterprise, held for sale to customers. When the property is sold, the resultingincome is ordinary income. 3225 Anselmo v. Commissioner, 757 F.2d 1208 (11th Cir. 1985).26 Chiu v. Commissioner, 84 T.C. 716 (1985).27 Dubin v. Commissioner, 52 T.C.M. (CCH) 456 (1985).28 Schachter v. Commissioner, 51 T.C.M. (CCH) 1428 (1986).29 Rhoades v. Commissioner, 55 T.C.M. (CCH) 1159 (1988).30 See § 21.2.31 See § 10.14.32 The term inventory is discussed in § 2.13. 272