1.276-1 Disallowance of deductions for certain indirect contributions to political parties.

1.278-1 Capital expenditures incurred in planting and developing citrus and al

mond groves.

1.279-1 General rule; purpose.

1.279-2 Amount of disallowance of interest on corporate acquisition indebtedness. 1.279-3 Corporate acquisition indebtedness. 1.279 4 Special rules.

1.279-5 Rules for application of section 279(b).

1.279 6 Application of section 279 to certain

affiliated groups.

1.279-7 Effect on other provisions. 1.280B-1 Demolition of structures. 1.280C-1 Disallowance of certain deductions for wage or salary expenses.

1.280C-3 Disallowance of certain deductions for qualified clinical testing expenses when section 28 credit is allowable. 1.280C-4 Credit for increasing research activities. 1.280F-1T Limitations on investment tax credit and recovery deductions under section 168 for passenger automobiles and certain other listed property; overview of regulations (temporary). 1.280F-2T Limitations on recovery deductions and the investment tax credit for certain passenger automobiles (temporary). 1.280F-3T Limitations on recovery deductions and the investment tax credit when the business use percentage of listed property is not greater than 50 percent (temporary).

1.280F-4T Special rules for listed property

Section 1.263A-7 also issued under 26 U.S 263A.

Section 1.263A-7T also issued under U.S.C. 263A.

263A.

Sections 1.263A-8 through 1.263A-15 a issued under 26 U.S.C. 263A(i).

Section 1.267(a)-3 also issued under U.S.C. 267(a)(3).

Section 1.267(f)-1 also issued under U.S.C. 267 and 1502.

Section 1.269-3(d) also issued under U.S.C. 382(m).

Section 1.274-5 also issued under 26 U.S 274(d).

Section 1.274-5T also issued under 26 U.S 274(d).

Section 1.274(d)-1 also issued under U.S.C. 274(d).

Section 1.274(d)-1T also issued under U.S.C. 274(d).

Section 1.280C-4 also issued under 26 U.S 280C(c) and 103 Stat. 2413.

Section 1.280F-1T also issued under U.S.C. 280F.

Section 1.280F-6 also issued under 26 U.S 280F.

Section 1.280F-7 also issued under 26 U.S 280F(c).

Section 1.280G-1 also issued under 26 U.S.C. 280G(b) and (e).

SOURCE: T.D. 6500, 25 FR 11402, Nov. 26, 1960; 25 FR 14021, Dec. 31, 1960, unless otherwise noted.

COMPUTATION OF TAXABLE

INCOME (CONTINUED)

ITEMIZED DEDUCTIONS FOR INDIVIDUALS

AND CORPORATIONS (CONTINUED)

§1.170-0 Effective dates.

Except as otherwise provided in this section, the provisions of section 170 and §§1.170-1 through 1.170-3 are applicable to contributions paid in taxable years beginning before January 1, 1970, and all references therein to sections of the Code are to sections of the Internal Revenue Code of 1954 prior to the amendments made by section 201(a) of the Tax Reform Act of 1969 (83 Stat. 549). Except as otherwise provided therein, §§1.170A through 1.170A-11 are applicable to contributions paid in taxable years beginning after December 31, 1969. In a case where a provision in §§ 1.170A through 1.170A-11 is applicable to a contribution paid in a taxable year beginning before January 1, 1970, such provision shall apply to the contribution and §§1.170-1 through 1.170-3 shall not apply to the contribution.

[T.D. 7207, 37 FR 20767, Oct. 5, 1972]

§ 1.170-1 Charitable, etc., contributions and gifts; allowance of deduction (before amendment by Tax Reform Act of 1969).

(a) In general—(1) General rule. Any charitable contribution (as defined in section 170(c)) actually paid during the taxable year is allowable as a deduction in computing taxable income, regardless of the method of accounting employed or when pledged. In addition, contributions by corporations may under certain circumstances be deductible even though not paid during the taxable year (see §1.170-3), and subject to the provisions of section 170(b)(5) and paragraph (g) of §1.170-2, certain excess charitable contributions made by individuals in taxable years beginning after December 31, 1963, shall be treated as paid in certain succeeding taxable years. The deduction is subject to the limitations of section 170(b) (see

§§1.170-2 and 1.170-3) and is subject to verification by the district director. For rules relating to the determination of, and the deduction for, amounts paid to maintain certain students as members of the taxpayer's household and treated under section 170(d) as paid for the use of an organization described in section 170(c) (2), (3), or (4), see paragraph (f) of §1.170-2. For a special rule relating to the computation of the amount of the deduction with respect to a contribution of section 1245 or section 1250 property, see section 170(e).

(2) Information required in support of deductions for taxable years beginning before January 1, 1964. In connection with claims for deductions for charitable contributions paid in taxable years beginning before January 1, 1964, taxpayers shall state in their income tax returns the name and address of each organization to which a contribution was made and the amount and approximate date of the actual payment of each contribution. Any deduction for charitable contribution must be substantiated, when required by the district director, by a statement from the organization to which the contribution was made indicating whether the organization is a domestic organization, the name and address of the contributor, the amount of the contribution, and the date of its actual payment, and by such other information as the district director may deem necessary.

(3) Information required in support of deductions for taxable years beginning after December 31, 1963—(i) In general. In connection with claims for deductions for charitable contributions paid in taxable years beginning after December 31, 1963, taxpayers shall state in their income tax returns the name of each organization to which a contribution was made and the amount and date of the actual payment of each contribution. If a contribution is made in property other than money, the taxpayer shall state the kind of property contributed (for example, used clothing, paintings, securities) and shall state the method utilized in determining the fair market value of the property at the time the contribution was made. In any case in which a taxpayer makes numerous cash contributions to an organization during the

taxable year, the taxpayer may state the total cash payments made to such organization during the taxable year in lieu of listing each cash contribution and the date of payment.

(ii) Contribution by individual of property other than money. If an individual taxpayer makes a charitable contribution of an item of property other than money and claims a deduction in excess of $200 in respect of his contribution of such item, he shall attach to his income tax return a statement setting forth the following information with respect to such item:

(a) The name and address of the organization to which the contribution was made.

(b) The date of the actual contribution.

(c) A description of the property in sufficient detail to identify the particular property contributed including, in the case of tangible property, the physical condition of the property at the time of contribution. In the case of securities, the name of the issuer, the type of security, and whether or not such security is regularly traded on a stock exchange or in an over-thecounter market.

(d) The manner (for example, by purchase, gift, bequest, inheritance, exchange, etc.) and the approximate date of acquisition of the property by the taxpayer. If the property was created, produced, or manufactured by the taxpayer, the approximate date the property was substantially completed.

(e) The fair market value of the property at the time the contribution was made, showing the method utilized in determining the fair market value. (If the valuation was determined by appraisal, a copy of the signed report of the appraiser should be submitted.)

In the case of property (not including securities) held by the taxpayer for a period less than five years immediately preceding the date on which the contribution was made, the cost or other basis, adjusted as provided by section 1016. If available, the cost or other basis, adjusted as provided by section 1016, of property (not including securities) held for a period of five years or more prior to the time of contribution should be submitted.

(g) In the case of section 1245 or section 1250 property, the reduction by reason of section 170(e) in the amount of the charitable contribution taken into account under section 170.

(h) The terms of any agreement or understanding entered into by or on behalf of the taxpayer relating to the use, sale, or disposition of the property contributed. For example, there must be attached to the income tax return of an individual taxpayer the terms of any agreement or understanding which restricts the donee's right to dispose of the donated property (either temporarily or permanently) or which reserves to, or confers upon, anyone other than the donee organization (or an organization participating with such organization in cooperative fund raising) any right to the income from such property, to the possession of the property (including the right to vote securities), to acquire such property by purchase or otherwise, or to designate who shall have such income, possession, or right to acquire. Notwithstanding the above, it will not be necessary to set forth the terms of any agreement or understanding which merely earmarks contributed property for a particular charitable use, such as the use of donated furniture in the reading room of the donee organization's library.

(i) The total amount claimed as a deduction for the taxable year due to the contribution of the property. If less than the entire interest in the property is contributed during the taxable year, the amount claimed as a deduction in any prior year or years for contributions of other interests in such property, the name and address of each organization to which any such contribution was made, the place where the property (if tangible property) is located or kept and the name of the person having actual possession of the property, if other than the organization to which the property giving rise to the deduction was contributed.

(iii) Statement from donee organization. Any deduction for a charitable contribution must be substantiated, when required by the district director, by a statement from the organization to which the contribution was made indicating whether the organization is a

domestic organization, the name and address of the contributor, the amount of the contribution, the date of actual receipt of the contribution, and such other information as the district director may deem necessary. If the contribution includes an item of property (other than money or securities which are regularly traded on a stock exchange or in an over-the-counter market) which the donee deems to have a fair market value in excess of $200 at the time of receipt, such statement shall also indicate for each such item its location if retained by the organization, the amount received by the organization on any sale of the property and the date of sale, or in case of other disposition of the property, the method of disposition.

(b) Time of making contribution. Ordinarly a contribution is made at the time delivery is effected. In the case of a check, the unconditional delivery (or mailing) of a check which subsequently clears in due course will constitute an effective contribution on the date of delivery (or mailing). If a taxpayer unconditionally delivers (or mails) a properly endorsed stock certificate to a charitable donee or the donee's agent, the gift is completed on the date of delivery (or mailing, provided that such certificate is received in the ordinary course of the mails). If the donor delivers the certificate to his bank or broker as the donor's agent, or to the issuing corporation or its agent, for transfer into the name of the donee, the gift is completed on the date the stock is transferred on the books of the corporation. For rules relating to a contribution consisting of a future interest in tangible personal property, see paragraph (d)(2) of this section.

(c) Contribution in property-(1) General rules. If a contribution is made in property other than money, the amount of the deduction is determined by the fair market value of the property at the time of the contribution. The fair market value is the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of relevant facts. If the contribution is made in property of a type which the taxpayer sells in the

course of his business, the fair market value is the price which the taxpayer would have received if he had sold the contributed property in the lowest usual market in which he customarily sells, at the time and place of the contribution (and in the case of a contribution of goods in quantity, in the quantity contributed). The usual market of a manufacturer or other producer consists of the wholesalers or other distributors to or through whom he customarily sells, unless he sells only at retail in which event it is his retail customers. If a donor makes a charitable contribution of, for example, stock in trade at a time when he could not reasonably have been expected to realize its usual selling price, the value of the gift is not the usual selling price but is the amount for which the quantity of merchandise contributed would have been sold by the donor at the time of the contribution. Costs and expenses incurred in the year of contribution in producing or acquiring the contributed property are not deductible and are not a part of the cost of goods sold. Similarly, to the extent that costs and expenses incurred in a prior taxable year in producing or acquiring the contributed property are reflected in the cost of goods sold in the year of contribution, cost of goods sold must be reduced by such costs and expenses. Transfers of property to an organization described in section 170(c) which bear a direct relationship to the taxpayer's business and which are made with a reasonable expectation of financial return commensurate with the amount of the transfer may constitute allowable deductions as trade or business expenses rather than as charitable contributions. See section 162 and the regulations thereunder.

(2) Reduction for certain interest. (i) With respect to charitable contributions made after December 31, 1957, section 170(b)(4) requires that the amount of the charitable deduction be reduced for certain interest to the extent necessary to avoid the reduction of the same amount both as an interest deduction under section 163 and as a deduction for charitable contributions under section 170. The reduction is to

be determined in accordance with subdivisions (ii) and (iii) of this subparagraph.

(ii) With respect to charitable contributions made after December 31, 1957, in determining the amount to be taken into account as a charitable contribution for purposes of section 170, the amount determined without regard to section 170(b)(4) or this subparagraph shall be reduced by the amount of interest which has been paid (or is to be paid) by the taxpayer, which is attributable to any liability connected with the contribution, and which is attributable to any period of time after the making of the contribution. The deduction otherwise allowable for charitable contributions under section 170 is required to be reduced pursuant to section 170(b)(4) only if, in connection with a charitable contribution, a liability is assumed by the recipient of the contribution or by any other person, or if the charitable contribution is of property which is subject to a liability. Thus, if the contribution is made in property and the transfer is conditioned upon the assumption of a liability by the donee or by some other person, any interest paid (or to be paid) by the taxpayer, attributable to the liability, and with respect to a period after the making of the contribution, will serve to reduce the amount that may be taken into account as a charitable contribution for purposes of section 170. The adjustment referred to in this subdivision must also be made where the contributed property is subject to a liability and the value of the property reflects the payment by the donor of interest with respect to a period of time after the making of the contribution.

(iii) If, in connection with the charitable contribution, after December 31, 1957, of a bond, a liability is assumed by the recipient or by any other person, or if the bond is subject to a liability, then, in determining the amount to be taken into account as a charitable contribution under section 170, the amount determined without regard to section 170(b)(4) or this subparagraph shall, without regard to whether any reduction may be required by subdivision (ii) of this subparagraph, also be reduced for interest which has been

paid (or is to be paid) by the taxpayer on indebtedness incurred or continued to purchase or carry such bond, and which is attributable to any period before the making of the contribution. However, the reduction referred to in this subdivision shall be made only to the extent that such reduction does not exceed the interest (including bond discount and other interest equivalent) receivable on the bond, and attributable to any period before the making of the contribution which is not, by reason of the taxpayer's method of accounting, includible in the taxpayer's gross income for any taxable year. For purposes of section 170(b)(4) and this subdivision the term bond means any bond, debenture, note, or certificate or other evidence of indebtedness.

(iv) The provisions of this subparagraph may be illustrated by the following examples:

Example 1. A, an individual using the cash receipts and disbursements method of accounting, on January 1, 1960, contributed to a charitable organization real estate having a fair market value of $10,000. In connection with the contribution the charitable organization assumed an indebtedness of $8,000 which A had incurred. A has prepaid two years' interest on that indebtedness (for 1960 and 1961) amounting to $960, and has taken an interest deduction of $960 for such amount. The amount of the gift, determined without regard to this subparagraph, is $2,960 ($10,000 less $8,000, the outstanding indebtedness, plus $960, the amount of prepaid interest). In determining the amount of the deduction for charitable contributions, the value of the gift ($2,960) must be reduced by $960 to eliminate from the computation of such deduction that portion thereof for which A has been allowed an interest deduction.

Example 2. On January 1, 1960, B, an individual using the cash receipts and disbursements method of accounting, purchased for $9,600 a 5 1/2 percent $10,000, 20-year M Corporation bond, the interest on which was payable semiannually on June 30 and December 31. The M Corporation had issued the bond on January 1, 1950, at a discount of $720 from the principal amount. On December 1, 1960, B donated the bond to a charitable organization, and, in connection with the contribution, the charitable organization assumed an indebtedness of $7,000 which B had incurred to purchase and carry the bond. During the calendar year 1960 B paid accrued interest of $330 on the indebtedness for the period from January 1 to December 1, 1960, and has taken an interest deduction of $330