14.19 Election To Reduce Fair Market Value by Appreciation

Although the 30% ceiling generally applies to long-term intangible property (such as securities) and real estate contributed to 50% limit organizations (14.17), you may elect the 50% ceiling, provided you reduce the fair market value of the property by 100% of the appreciation on all such donations during the year. The reduction also applies to donations of tangible personal property related in use to the organization’s charitable function. In most cases, this election should be made only where the amount of appreciation is negligible. Where there is substantial appreciation, the increase in the deduction may not make up or exceed the required 100% reduction, which allows you to claim a deduction only for your cost basis in the property. If the election is made in a year in which there are carryovers of capital gain property subject to the 30% ceiling, the carryovers are subject to reduction; see IRS Publication 526.

The election of the 50% ceiling is made by attaching a statement to your original return or amended return filed by the original due date. Even where no formal electing statement is made, claiming a deduction without the appreciation in order to come within the 50% ceiling is treated as an election. A formal or “informal” election is not revocable unless a material mistake is shown. A revocation based on a reconsideration of tax consequences is not considered sufficient grounds.

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