@Casimir1 wrote:
Are you saying if I bought a card for $1 20 years ago and today it is worth $500, the deduction is limited to $1 if I give it to a church, animal shelter, etc? Why is it different than people who donate their business, land, boat, etc., none of which the charity will use in their operations, but will sell?
Correct. The difference is how the law treats tangible personal property. And the same rule applies to the boat, in your example.
If you sold the card to a third party buyer, you would be required to report and pay capital gains tax on $499 of capital gains. You could then donate some or all of the cash to the charity and take a deduction for the amount of cash donated. But if you donate the item to a charity that will use the item for an unrelated purpose (a purpose unrelated to the type of item) then your maximum donation value is what you paid for the item, otherwise known as it's cost basis. (Or, you can deduct the entire fair market value of $500 but only if you also report and pay tax on the $499 of capital gains.) If you donate the item to a charity that will use the item for a related purpose, you can deduct the fair market value.
In practice, that means that if you buy a painting for $1000 and it is now worth $10,000 and you donate it to a church to sell for operating money, you can only deduct the $1000. But if you donate it to a museum and they will keep it in their collection (using it for a related purpose) you can deduct the fair market value of $10,000.
The same rule applies to the boat, except that it is even more restrictive. You can't claim the fair market value of the boat, but only what the charity actually gets for it when they sell it, or your cost if your cost was less.
The same rules apply to all tangible personal property -- items you can touch and hold and own. It just doesn't come up very often because most used stuff is worth less than what you paid for it new.
A business is intangible property, because the business (as separate from its inventory) is made up of good will and so on. I have no idea what the rules are on donating a business. If you donate inventory from a business, you don't get any tax deduction at all most of the time, because you already deducted the cost of inventory as business expense so your cost basis in the inventory is zero.
Land is not tangible personal property, it is "real property" (real estate=land and anything that is permanently attached) and the rules are different because that's how Congress decided.
See here https://www.irs.gov/forms-pubs/about-publication-526
