Valuation of Contribution Property

Valuation:

Fair market value ("FMV") = price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of relevant facts.  Sec. 1.170A-1(c)(2).

Contribution of Property Placed in Trust:  No deduction shall be allowed under Sec. 170 for the value of a contribution of a remainder interest unless the trust is a charitable remainder annuity trust or a charitable remainder unitrust or a pooled income fund.  Sec. 170(f)(2).

Partial Interests in Property:

     Generally, a deduction shall be allowed under Sec. 170 only to the extent that the value of the interest contributed would be allowable as a deduction under Sec. 170 if such interest had been transferred in trust (i.e., generally, no deduction).  However, there are three exceptions:  (1) remainder interest in a personal residence or farm; (2) undivided portion of the taxpayer’s entire interest in property; and (3) qualified conservation contribution.  See Sec. 170(f)(3).

     Valuation requires consideration of:  (1) the 7520 Rate; and (2) the donor’s age (life contingencies in mortality tables prescribed by the IRS).  See Sec. 7520.  The 7520 Rate is equal to 120% of the applicable federal midterm rate for the month of the valuation date (e.g., date of contribution); provided, however, that the taxpayer may elect to use either of the two months preceding the valuation date for the purpose of determining the 7520 Rate.