9068 / Is a charitable deduction available for the donation of appreciated tangible personal property, such as art, stamps, coins and gems?

The following example illustrates the meaning of “unrelated use”: “[I]f a painting contributed to an educational institution is used by that organization for educational purposes by being placed in its library for display and study by art students, the use is not an unrelated use; but if the painting is sold and the proceeds used by the organization for educational purposes, the use of the property is an unrelated use.” In addition, the regulations state that contributions of furnishings used by the charitable organization in its offices and buildings in the course of carrying out its functions will be considered a related use gift.³

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Planning Point: The charitable organization will state on IRS Form 8283, Part IV (which the donor provides to the IRS as part of the donor’s income tax return) whether it intends to use the item for an unrelated use.

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The IRS has determined that a gift of seeds, plants, and greenhouses to an IRC Section 501(c)(3) school’s plant science curriculum was a related use gift, and that a gift of a violin to a charitable organization whose exempt purpose included loaning instruments to music students was a related use gift.⁴ The IRS has also found that contributions of art to a Jewish community center for use in the center’s recreational, educational, and social activities were related use gifts.⁵

If the taxpayer contributes long-term capital gain “related use” property to public charities, the taxpayer may elect to value the gift at its adjusted basis instead of its fair market value. If this election is made, the 30 percent of adjusted gross income limit does not apply. Instead, the donor may deduct the amount of his adjusted basis in the gift, up to 60 percent of adjusted gross income. If the taxpayer makes the election, it applies to all gifts of long-term capital gain property during the year.⁶ Such an election is generally irrevocable.⁷

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Planning Point: The CARES Act lifted the 60 percent AGI limit for 2020 contributions. This relief was also extended through 2021.

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The amount of the deduction for a contribution of tangible personal property must be reduced by the amount of gain that would not be long-term capital gain (gain on a capital asset held for more than one year, see Q 8625) if the contributed property had been sold at its fair market value at the time of the contribution. Thus, for example, if the entire gain would be ordinary income, the allowable deduction would be limited to the taxpayer’s adjusted basis in the contributed property. It makes no difference whether or not the property is put to a related use.⁸ Ordinary income property includes a work of art created by the donor.⁹

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Planning Point: If an artist makes a charitable gift of the artist’s own artwork, the artist will only be able to deduct the costs of creating the art (e.g., paper, paint, etc.).

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The charitable deduction is recaptured by the donor on certain dispositions by the charity of tangible personal property identified by the charity as related use property for which a deduction in excess of basis was allowed. Unless the charity makes the appropriate certification, recapture applies if the charity disposes of the property after the taxable year the property was contributed, but before the end of the three-year period starting on the date of contribution (see Q 9063). The certification must be in writing and signed under penalty of perjury by an officer of the charity. The written statement must (1) certify that the use of the property was related and describe the use of the property or (2) state the intended use at the time of contribution and certify that the intended use has become impossible or infeasible to implement. The amount recaptured (included in income) in the year of disposition is equal to the amount of the charitable deduction minus the donor’s basis in the property at the time of contribution.¹⁰

Example. Amy contributes a painting to an art museum in December 2024. The museum intends to display the painting. Amy claims a charitable deduction for the painting’s fair market value of $100,000 for 2024. Amy’s basis in the painting was $40,000. In 2025 (within three years of the contribution), the museum sells the painting. Amy must include $60,000 ($100,000 charitable deduction - $40,000 basis) in income in 2025.

A charity is required to report any disposition of property (other than publicly traded securities) within three years after its receipt to the IRS, if the claimed value of the property (plus the claimed value of all similar items of property by the donor to one or more charities) exceeds $5,000. A copy of the related use certification (see above) must be included with this return.¹¹ Any person who identifies tangible personal property as related use property and knows that the property is not intended for such use is subject to a $10,000 penalty.¹²