Gifts of Appreciated Property
A viable alternative to a cash gift is a gift of property. With careful planning, charitable gifts of certain types of assets will provide even greater tax benefits to the donor than a cash gift of equivalent value.

The most favorable tax benefits are generated by contributions of appreciated, long-term, capital-gain securities and real estate.

Reason: In addition to receiving a charitable deduction for the full fair-market value of such a gift, the donor escapes any potential tax on the capital-gain element of the gifted property.

The full fair-market value of gifts of long-term, capital-gain securities or real estate is deductible up to 30% of a donor's AGI. Any amount in excess of the 30% ceiling can be carried forward for five years.

Property that has Declined in Value: A donor considering a gift of property that has gone down in value would be better off selling the property to realize a deductible loss and then contributing the proceeds to charity and obtaining a charitable deduction. This process assures recognition and deductibility of the loss.

The Bargain Sale
A donor who wants to recover a portion of the value of property that he or she wishes to contribute to charity may consider entering into a bargain-sale transaction with the charity.

In effect, a bargain sale is a sale of property to charity for less than its fair-market value. The bargain sale price may be any amount mutually acceptable to the charity and the donor. Some donors are willing to sell the property for an amount equal to their cost basis. In this manner, they recover their investment and get a deduction for the appreciated element. The tax law states, however, that the recovered portion cannot be treated wholly as basis but rather as part basis and part reportable capital gain.

Tangible Personal Property
As with gifts of long-term, capital-gain securities or real estate, a donor is entitled to a charitable deduction for gifts of long-term, capital-gain, tangible personal property (such as works of art, rare books, and stamp or coin collections, etc.). The extent of the allowable deduction for a gift of such property is dependent upon the so-called standard of "related use."

If the use of the contributed property is related to the exempt purposes of the charity, then the donor would be entitled to a charitable deduction for the full fair-market value of the property -- subject to the 30% ceiling and carryover.

If the use of the contributed property is unrelated to the exempt purposes of the charity, then the donor would be entitled to a charitable deduction for his or her basis in the property.

When the donor is the creator of the contributed tangible asset, his or her deduction is limited to the actual cost of producing the asset.

Gifts of Closely Held Stock Followed by Redemption
A business owner who contributes closely held stock to charity will be allowed a charitable deduction for the fair-market value of the stock. An additional benefit is that the donor will escape the potential capital-gain tax on any appreciation in the value of the stock.

After the gift is made, the corporation could purchase the stock from the charity for cash. This not only enables the donor to retain complete control over the company, but it also makes cash available to the charity for its current needs. As long as the charity is not obligated to sell the stock to the corporation, the transaction should produce no adverse tax results.