Page 165

TITLE 26-INTERNAL REVENUE CODE year intervening between the contribution year and such succeeding taxable year. (B) Special rule for net operating loss carryovers For purposes of subparagraph (A), the excess of- (I) the contributions made by a corpora- tion in a taxable year to which this sec- tion applies, over (ii) the amount deductible in such year under the limitation in subsection (b)(2), shall be reduced to the extent that such excess reduces taxable income (as computed for purposes of the second sentence of sec- tion 172(b)(2)) and increases a net operating loss carryover under section 172 to a suc- ceeding taxable year. (e) Certain contributions of ordinary income and capital gain property (1) General rule The amount of any charitable contribution of property otherwise taken into account under this section shall be reduced by the sum of- (A) the amount of gain which would not have been long-term capital gain if the property contributed had been sold by the taxpayer at its fair market value (deter- mined at the time of such contribution), and (B) in the case of a charitable contribu- tion- (I) of tangible personal property, if the use by the donee is unrelated to the pur- pose or function constituting the basis for its exemption under section 501 (or, in the case of a governmental unit, to any pur- pose or function described in subsection (c)), or (ii) to or for the use of a private founda- tion (as defined in section 509(a)L other than a private foundation described in subsection (b)(1)(D), 50 percent (62'/2 percent, in the case of a corporation) of the amount of gain which would have been long-term capital gain if the property contributed had been sold by the taxpayer at its fair market value (deter- mined at the time of such contribution). For purposes of applying this paragraph (other than in the case of gain to which sec- tion 617(d)(1), 1245(a), 1250(a), 1251(c), 1252(a) or 1254(a) applies), property which is property used in the trade or business (as de- fined in section 1231(b)) shall be treated as a capital asset. (2) Allocation of basis For purposes of paragraph (1), in the case of a charitable contribution of less than the taxpayer's entire interest in the property con- tributed, the taxpayer's adjusted basis in such property shall be allocated between the inter- est contributed and any interest not contrib- uted in accordance with regulations pre- scribed by the Secretary. (3) Special rule for certain contributions of inven- tory and other property (A) Qualified contributions For purposes of this paragraph, a quali- fied contribution shall mean a charitable contribution of property described in para. graph (1) or (2) of section 1221, by a corpo. ration (other than a corporation which is an electing small business corporation within the meaning of section 1371(b)) to an organization which is described in sec- tion 501(c)(3) and is exempt under section 501(a) (other than a private foundation, as defined in section 509(a), which is not an operating foundation, as defined in section 4942(j)(3)), but only if- (I) the use of the property by the donee is related to the purpose or function con- stituting the basis for its exemption under section 501 and the property is to be used by the donee solely for the care of the ill, the needy, or infants; (ii) the property is not transferred by the donee in exchange for money, other property, or services; (iii) the taxpayer receives from the donee a written statement representing that its use and disposition of the proper- ty will be in accordance with the provi- sions of clauses (I) and (ii); and (iv) in the case where the property is subject to regulatlcn under the Federal Food, Drug, and Cosmetic Act, as amend- ed, such property must fully satisfy the applicable requirements of such Act and regulations promulgated thereunder on the date of transfer and for one hundred and eighty days prior thereto. (B) Amount of reduction The reduction under paragraph ()(A) for any qualified contribution (as defined in subparagraph (A)) shall be no greater than the sum of- (i) one-half of the amount computed under paragraph (1)(A (computed with- out regard to this paragraph), and (ii) the amount (if any) by which the charitable contribution deduction under this section for any qualified contribution (computed by taking into account the amount determined in clause (I), but with- out regard to this clause) exceeds twice the basis of sucl: property. (C) This paragraph shall not apply to so much of the amount of the gain described in paragraph (1)(A) which would be long- term capital gain but for the application of sections 617, 1245, 1250, 1251, or 1252. (f) Disallowance of deduction in certain cases and special rules (1) In general No deduction shall be allowed under this section for a contribution to or for the use of an organization or trust described in section 508(d) or 4948(c)(4) subject to the conditions specified in such sections. (2) Contributions of property placed in trust (A) Remainder interest In the case of property transferred in trust, no deduction shall be allowed under this section for the value of a contribution of a remainder interest unless the trust is a 71-999 0 - 78 - 13 (Vol. 7) Page 165 § 170