[arsenal22]

I came across this question while surfing the internet and wasn’t sure what the solution would be…

Depreciated stock is donated to a charity. The tax basis in the stock is $10,000 while the FMV is only $5,000. I’m curious what the implications would be if it was considered a short term capital asset vs a long term capital asset. My initial thoughts are that if it is a short term asset I would only be able to claim the $5,000 as the charitable contribution (Ordinary Income Rule). However, if it is a long term asset would I be limited to claiming $5,000 as the contribution and the $5,000 difference would be considered a long term capital loss?

After researching it on the IRC and in my Roger course materials, I can only see what happens if the asset appreciates in value, but not if it depreciates.

[12tang]

In instances you're not dealing with appreciated property, it's the lesser of FMV or Basis at the time of transaction. That's all you need to know.

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[Anonymous]

In order to take the loss you would need to sell the stock first and then contribute the cash.

[Author]

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