By Basile, Anthony
The CPA Journal , Vol. 69, No. 9
QUALIFIED CONTRIBUTIONS ARE LIMITED TO GIFTS made no later than two years after the taxpayer acquired the donated property.
or tax years beginning in 1998, the opportunity for charitable contribution deductions has increased, due to the amendment to IRC section 170(eX6) made by the Taxpayer Relief Act of 1997. Congress created an incentive for businesses to invest their computer equip ment and software to provide primary and secondary school students and teachers with the resources needed in a technologically advanced future.
Charitable contributions of computer equipment, however, will receive special treatment under the law only for a limited period of time, so careful planning is essential. Typically, the amount of the deduction for property contributed to a charitable organization is the fair market value on the date of contribution. Contributions of inventory, short-term capital gain property, or other ordinary income property is generally limited to the taxpayer's basis in the property. The deduction for property contributed to an organization and put to use in a way unrelated to the organization's tax-exempt purpose is also limited to the adjusted basis of the property.
This treatment does not apply to certain corporate contributions of inventory and other property for the care of the ill, the needy, or infants and for certain contributions of scientific equipment constructed by the taxpayer to be used in domestic physical or biological research. In these cases, an augmented deduction is provided for under IRC sections 170(eX3) and 170(eX4). Under this special rule, the deduction is the basis of the property plus one-half of the ordinary income that would have been realized if the property were sold. The deduction is limited to twice the basis in the property using this calculation.
Qualified contributions are limited to gifts made no later than two years after the date the taxpayer acquired or substantially completed the construction of the donated property. Property is considered constructed by the taxpayer only if the cost of the parts used in the construction of the property (other than parts manufactured by the taxpayer or a related person) do not exceed 50% of the taxpayer's basis.
The original use of the property must be by the donor or donee. The donee may not transfer the donated property for money, services, or other property, except for shipping, transfer, and installation costs.
The 1997 Act provides that for years beginning after 1997 and before 2000, the list of contributions that qualify for augmented charitable deductions has been expanded to include certain contributions of computer technology to primary and secondary schools. The new rules are only applicable to certain C corporations. …