Saturday May 4, 2024

Rev. Rul. 55-410

GiftLaw Note:

Revenue Ruling 55-410, 1955-1 CB 297, (Jan. 01, 1955)

REGULATIONS 118, SECTION 39.23(o)-1: Contributions or gifts by individuals.

The satisfaction of a pledge to an organization described in section 23(o) of the Internal Revenue Code of 1939 by means of a donation or gift of property which has either appreciated or depreciated in value does not give rise to a taxable gain or a deductible loss. Such contribution is deductible to the extent of the fair market value thereof at the time of the contribution or gift, to the extent provided by law.

Advice has been requested whether the satisfaction of a pledge made in terms of dollars to an organization described in section 23(o) of the Internal Revenue Code of 1939, by the donation or gift of property which has either appreciated or depreciated in value will be considered a taxable event giving rise to a gain or loss Federal income tax purposes.

Section 23(o) of the Code allows as a deduction in the case of an individual, subject to prescribed limitations, "contributions for gifts payment of which is made within the taxable year to or for the use of" certain specified organizations.

Section 39.23(o)-1 of Regulations 118 provides, in part, that a deduction is allowable under section 23(o) of the Code only with respect to contributions or gifts which are actually paid during the taxable year, regardless of when pledged and regardless of the method of accounting employed by the taxpayer in keeping his books and records. If the contributions or gift is in a medium other than money, the basis for calculating the amount of the gift is the fair market value of the property at the time of the contribution or gift.

It follows that for purposes of section 23(o) of the Code the event which gives rise to the deduction is the actual payment of money or the transfer of property. It would be inconsistent to treat such payment or transfer as a "contribution or gift" and at the same time as a satisfaction of a debt with the tax consequences which would ordinarily follow from the use of appreciated property or depreciated to pay a debt.

In view of the foregoing it is held that the satisfaction of a pledge to an organization described in section 23(o) of the Internal Revenue Code of 1939, by means of a donation or gift of property which has either appreciated or depreciated in value, does not give rise to a taxable gain or a deductible loss. Such contribution is deductible to the extent of the fair market value thereof at the time of the contribution or gift. With respect to the manner of handling contributions of agricultural or manufactured products or property held for sale in the ordinary course of business see Revenue Ruling 55-138, page 223 of this Bulletin.