C.1. Tax Considerations Pertaining to Noncash Gifts
     January 1989

Development Policy and Administration Manual 
Chapter IV. Gift Administration Procedures 
Section B. Documenting Gifts     
*************************************************************
              TAX CONSIDERATIONS PERTAINING TO NONCASH GIFTS


A donor can potentially benefit from making noncash gifts in two
ways.  First, the donor will often avoid paying tax on capital
gains for property that has appreciated in value (unless the
donor is subject to the alternative minimum tax).  

Second, with certain exceptions the donor will receive a charita-
ble deduction for the full fair market value of the property. 
One such exception that applies to all noncash gifts is that of
ordinary income property.  Ordinary income property is defined as
property whose sale would result in ordinary income or short-term
capital gains, and the tax deduction for such property must be
reduced from fair market value by the amount of short-term
capital-gain or ordinary income that would have been realized by
the donor had the asset been sold, i.e., the deduction is limited
to the donor's cost basis.  Common examples of ordinary income
property include business inventory; works of art, manuscripts,
or memorabilia created by donors themselves; and short-term
capital-gain assets (assets held less than the required holding
period for long-term capital-gains treatment). 

In order to consummate a fully effective legal transfer of a
nonmonetary gift for tax purposes, the property must be placed
under the control or in the physical possession of a duly author-
ized representative of the University other than the donor.

The information about tax considerations that is given here
applies to all noncash gifts.  For specific information about tax
considerations that are unique to certain types of noncash gifts,
see Section IV: D.1, Securities; Section IV: D.3, Gifts of Tan-
gible Property; Section IV: D.5, Life Insurance; and Section
IV: D.7, Bargain Sales.