Donate fruits to charities

[mooretax]

Taxpayers have fruit trees in their gardens.
They donate oranges and lemons to qualified charities.

Can they have tax deductions for the fruits?

[Lion]

Deduct lower of cost or FMV. Do your clients know their cost of each fruit, as they're in the business of selling fruit from their orchards? Or, are these personal trees in their personal gardens with a probable cost of zero?

[spanel]

Deduct lower of cost or FMV. Do your clients know their cost of each fruit, as they're in the business of selling fruit from their orchards? Or, are these personal trees in their personal gardens with a probably cost of zero?

Personal trees = no deduction.

Business trees = no deduction as they are already deducting any cost of good sold/expense that has to do with trees.

Unless they purchase the fruit and donate, their cost is 0, therefor no deduction.

Chris

[Roland Slugg]

I'm not sure I agree with the two posts above.

I'm assuming the fruit is not business "inventory" that's sold as an operating or even occasional business. The OP says the trees are in the T/P's gardens, so I assume they are purely personal assets. I also assume the trees are more than one year old, even though the lemons and oranges themselves are less than one year old. Thus, the trees and their bounty would yield LTCG if sold.

If all the above is true, then the T/P may deduct the FMV of the donated fruit. This further assumes that the use of the fruit by the donees is somehow related to the charities' exempt purposes. To determine the FMV I would ask the T/P to look at prices charged for similar items in grocery stores. I would lean toward grocery stores with average or lower prices, but also look for comparable quality. I'd also suggest that the T/P consider quantity pricing. If a single orange sells for, say, 50¢, but a 10-lb sack containing 15 oranges sells for $5.00, I'd use the $5.00 price for each 10 pounds of donated oranges.

You may also wish to review IRS Pub 526.

[taxea]

I agree with roland. But not cost at grocery stores. I would value the donation as what they would sell at a farmers/flea or roadside market. Their cost would be what they pay in water, fertilizer, pruning and trash pickup or dump runs and any other maintenance. If they do their own labor to maintain the trees then they can only include the other items.

[New York Enrolled Agent]

I also assume the trees are more than one year old, even though the lemons and oranges themselves are less than one year old. Thus, the trees and their bounty would yield LTCG if sold.


I'm interested in how you reached that conclusion. Why would the bounty be considered LT?

Suppose I have carpentry equipment (more than one year old) and I make some woodworking items and donate them to charity after the project is finished. I can only deduct my cost. Correct? I'm having trouble understanding why the fruit would be different and considered long term. Please share your thoughts.

[taxea]

common sense. These are not income producting trees they are personal property. Not the same as business issues, I would think.

[Lion]

But, they didn't give away the whole tree.

If I give away some old clothes I found in the attic when I bought my house, I have zero cost basis in those clothes. Zero charitable deduction. (Well, I guess the price of the house could've included the value of the attic contents, but it didn't.)

Your client didn't buy the fruit. And even if you monetize his care and nurturing of the fruit, you still have to divide that out over his entire harvest for the year and for future years that benefit from his pruning, fertilizing, etc. Did he really count his oranges and lemons each year? And, would he have taken care of the trees anyway, even if he didn't give away any fruit but kept all the oranges and lemons for himself. Does he really have any marginal costs to produce the fruit he gave away?

[Roland Slugg]

My reasoning was that the trees produce their fruit all by themselves with little or no involvement by the homeowner. This is hardly the same as someone making furniture after buying woodworking tools as suggested by NYEA.

If you consider the annual growth cycle of citrus trees, it's arguably a year-long cycle, so by the time the fruit is picked and donated it is close to a year old ... start to finish. Furthermore, some kinds of oranges and lemons can be left on the tree for up to a year after they first ripen.

I may be wrong about the ST/LT holding period, but if one of my clients told me he donated 25 pounds of oranges or lemons from his backyard trees to his church, I would consent to his taking a reasonable deduction as a non-cash contribution.

[taxea]

I was just saying.......if they wanted to show a basis that would be a logical way to do it. My real opinion is I thing donations should be given from the heart not just to get a tax deduction.

[mooretax]

The value of good deeds

Taxpayers are not in the business of selling fruits. They have fruits in their own gardens.

Here is the article that is good to read. Under Orange Case section the taxpayer can claim
the donation deduction.

http://www.marketwatch.com/story/the-right-way-to-value-charitable-donations

[Rapid Robert]

Forget the donation... I want to know why the fruit from a homeowner's back yard tree is not considered "gross income from whatever source derived".

Obviously no one actually reports taxable income from their own backyard fruit trees, but under what law or theory is it excluded?

I'm talking about a tree that just grows on its own, with no care or maintenance by the homeowner. One morning he walks out the door, and a perfect apple or orange just falls into his pocket.

[TAXNJ]

Roland is correct

I also assume the trees are more than one year old, even though the lemons and oranges themselves are less than one year old. Thus, the trees and their bounty would yield LTCG if sold.


I'm interested in how you reached that conclusion. Why would the bounty be considered LT?

Suppose I have carpentry equipment (more than one year old) and I make some woodworking items and donate them to charity after the project is finished. I can only deduct my cost. Correct? I'm having trouble understanding why the fruit would be different and considered long term. Please share your thoughts.

property held (more than 1 year) for personal use is a capital asset, therefore LTCG

[Rapid Robert]

property held (more than 1 year) for personal use is a capital asset, therefore LTCG

But the fruit wasn't held for more than one year, and the tree wasn't donated.

[TAXNJ]

But the fruit wasn't held for more than one year, and the tree wasn't donated.

See Roland Slugg 2-28-17 reply post.