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Step 3. Determine whether the amount of your charitable contribution is the fair market value of the contributed part (which you found in Step 1) or the adjusted basis of the contributed part (which you found in Step 2). Generally, if the property sold was capital gain property, your charitable contribution is the fair market value of the contributed part. If it was ordinary income property, your charitable contribution is the adjusted basis of the contributed part. See Ordinary Income Property and Capital Gain Property, both earlier, for more information. Example. You sell ordinary income prop- erty with a fair market value of $10,000 to a church for $2,000. Your basis is $4,000 and your adjusted gross income is $20,000. You make no other contributions during the year. The fair market value of the contributed part of the property is $8,000 ($10,000 − $2,000). The adjusted basis of the contributed part is $3,200 ($4,000 × ($8,000 ÷ $10,000)). Because the property is ordinary income property, your char- itable deduction is limited to the adjusted basis of the contributed part. You can deduct $3,200. Penalty You may be liable for a penalty if you overstate the value or adjusted basis of contributed prop- erty. 20% penalty. The penalty is 20% of the amount by which you underpaid your tax be- cause of the overstatement, if: 1. The value or adjusted basis claimed on your return is 150% or more of the correct amount, and 2. You underpaid your tax by more than $5,000 because of the overstatement. 40% penalty. The penalty is 40%, rather than 20%, if: 1. The value or adjusted basis claimed on your return is 200% or more of the correct amount, and 2. You underpaid your tax by more than $5,000 because of the overstatement. When To Deduct You can deduct your contributions only in the year you actually make them in cash or other property (or in a later carryover year, as ex- plained under How To Figure Your Deduction When Limits Apply, later). This applies whether you use the cash or an accrual method of ac- counting. Time of making contribution. Usually, you make a contribution at the time of its uncondi- tional delivery. Checks. A check you mail to a charity is considered delivered on the date you mail it. Text message. Contributions made by text message are deductible in the year you send the text message if the contribution is charged to your telephone or wireless account. Credit card. Contributions charged on your bank credit card are deductible in the year you make the charge. Pay-by-phone account. Contributions made through a pay-by-phone account are con- sidered delivered on the date the financial insti- tution pays the amount. This date should be shown on the statement the financial institution sends you. Stock certificate. A properly endorsed stock certificate is considered delivered on the date of mailing or other delivery to the charity or to the charity's agent. However, if you give a stock certificate to your agent or to the issuing corporation for transfer to the name of the char- ity, your contribution isn't delivered until the date the stock is transferred on the books of the corporation. Promissory note. If you issue and deliver a promissory note to a charity as a contribution, it isn't a contribution until you make the note payments. Option. If you grant a charity an option to buy real property at a bargain price, it isn't a contribution until the charity exercises the op- tion. Borrowed funds. If you contribute bor- rowed funds, you can deduct the contribution in the year you deliver the funds to the charity, re- gardless of when you repay the loan. Conditional gift. If your contribution de- pends on a future act or event to become effec- tive, you can't take a deduction unless there is only a negligible chance the act or event won't take place. If your contribution would be undone by a later act or event, you can't take a deduction un- less there is only a negligible chance the act or event will take place. Example 1. You contribute cash to a local school board, which is a political subdivision of a state, to help build a school gym. The school board will refund the money to you if it doesn't collect enough to build the gym. You can't de- duct your contribution until there is no chance (or only a negligible chance) of a refund. Example 2. You donate land to a city for as long as the city uses it for a public park. The city plans to use the land for a park, and there is no chance (or only a negligible chance) of the land being used for any different purpose. You can deduct your charitable contribution in the year you make the contribution. Limits on Deductions If your total contributions for the year are 20% or less of your adjusted gross income, you don't need to read the rest of this section. The remaining limits discussed in this section don't apply to you. The amount you can deduct for charitable contributions is generally limited to no more than 60% of your adjusted gross income (AGI). Your deduction may be further limited to 50%, 30%, or 20% of your AGI, depending on the TIP type of property you give and the type of organi- zation you give it to. A higher limit applies to certain qualified conservation contributions and qualified cash contributions for 2020. These limits are described in detail in this section. Your AGI is the amount on Form 1040 or 1040-SR, line 11. If your contributions are more than any of the limits that apply, see Carryovers under How To Figure Your Deduction When Limits Apply, later. Out-of-pocket expenses. Amounts you spend performing services for a charitable or- ganization may be deductible as a contribution to a qualified organization. If so, your deduction is subject to the limit applicable to donations to that organization. For example, the 30% limit applies to amounts you spend on behalf of a private nonoperating foundation. Types of Qualified Organizations For the purpose of applying the deduction limits to your charitable contributions, qualified organ- izations can be divided into two categories. First category of qualified organizations (50% limit organizations). The first category includes only the following types of qualified or- ganizations. (These organizations are also sometimes referred to as “50% limit organiza- tions.”) 1. Churches and conventions or associations of churches. 2. Educational organizations with a regular faculty and curriculum that normally have a regularly enrolled student body attend- ing classes on site. 3. Hospitals and certain medical research or- ganizations associated with these hospi- tals. 4. Organizations that are operated only to re- ceive, hold, invest, and administer prop- erty and to make expenditures to or for the benefit of state and municipal colleges and universities and that normally receive substantial support from the United States or any state or their political subdivisions, or from the general public. 5. The United States or any state, the District of Columbia, a U.S. possession (including Puerto Rico), a political subdivision of a state or U.S. possession, or an Indian tribal government or any of its subdivisions that perform substantial government func- tions. 6. Publicly supported charities, defined ear- lier under Qualified Conservation Contri- bution. 7. Organizations that may not qualify as “publicly supported” but that meet other tests showing they respond to the needs of the general public, not a limited number of donors or other persons. They must normally receive more than one-third of their support either from organizations Page 14 Publication 526 (2020)