Land Value for Non-Cash Contribution

[Bonnie]

Customer asks me about taking a Tax wright off for donating some land he bought to a church. He has not done this yet, just questioning to see what his options are. He went to an auction and bought 3 lots for $12,000 for all 3. These lots were valued at 25,000-35,000 at one time but the housing market being what it is the developer can't sell houses already built and the bank sold some of them at an absolute auction. Not sure what he thinks the church will do with them if he donates but I think he wants to use the value of 25-35,000 as his wright off on Sch A. My thinking is he would have to value them at what he paid for them. Any thoughts? Just want to look at all angles before I give him an answer. I told him I'd research it and get back to him. Thanks

[DaveO]

Since the donation would be in excess of $10,000 he would need a written appraisal. Pretty sure that property owned less than 1 year is limited to the lesser of cost or FMV.

[Bonnie]

Looking for the reference that says lesser of cost or FMV if held less than a year, can't seem to find it. Anyone?

[appelman]

From Pub. 526

Property is ordinary income property if its sale at fair market value on the date it was contributed would have resulted in ordinary income or in short-term capital gain. Examples of ordinary income property are inventory, works of art created by the donor, manuscripts prepared by the donor, and capital assets (defined later, under Capital Gain Property) held 1 year or less.
...
Amount of deduction. The amount you can deduct for a contribution of ordinary income property is its fair market value minus the amount that would be ordinary income or short-term capital gain if you sold the property for its fair market value. Generally, this rule limits the deduction to your basis in the property.