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the donee charities. Instead, the company serves as agent for the cardholders with respect to the rebate amounts it holds. Thus, although the rebates are held by the company, the cardholders retain control over them.

      For a charitable gift to be deductible, there must be the requisite delivery. It is not enough for there to be delivery to a party for subsequent delivery to a charitable organization. Accordingly, there is no delivery of a charitable contribution when the company receives the rebate amounts, nor when cardholders fail to claim rebates for their personal use. Rather, delivery occurs when the company transfers the rebate funds to the designated charities. (If the company served as the agent of the charities, the charitable deduction would arise at the time the company received the rebate amounts.) This program is designed to allow individuals to have the charitable deduction in the year of the rebate by enabling the company to transfer the rebates to charities before the close of the tax year.

§ 4.13 CONTRIBUTIONS OF TANGIBLE PERSONAL PROPERTY

      A person may make deductible gifts of tangible personal property to a charitable organization. Items of tangible personal property include works of art, furniture, automobiles, and clothing.

      Usually, there is no formal system in law for the recording and transfer of an item of tangible personal property. (The obvious exception, of course, is the title requirements involving motor vehicles.) In appropriate circumstances, however, title transfer of tangible personal property to a charitable organization can be evidenced by the making of a deed of gift.

§ 4.14 CONTRIBUTIONS OF REAL PROPERTY

A person may contribute real property to a charitable organization and receive an income tax charitable deduction. There is, of course, a formal system in law for the recording and transfer of title to parcels of real estate; transfers of real property are generally effected by means of deeds. Thus, the availability of this type of federal charitable contribution deduction may turn on compliance with state law.⁶¹

As to the timing of the deduction, the contribution for a gift of real property generally occurs on the date the donor delivers a deed to the property to the charitable donee.⁶² State law varies as to whether recording of a deed is necessary to make the transfer complete.⁶³

A court denied a charitable contribution deduction for a transfer of real property ostensibly occurring in 1999 because the bill of sale executed on the last day of that year did not result in an irrevocable transfer to the charitable organization involved of legal title to the property because the sale document was not executed in accordance with state law.⁶⁴ A properly executed bill of sale was delivered to the charity in the subsequent year; that was the year in which the deduction was allowed.

A charitable contribution deduction for a transfer of mortgaged land to a charitable organization by a partnership was denied by a court because the property was subject to a special warranty deed. Under state law, the donor partnership remained liable on the outstanding mortgage. The deed imposed an obligation on the grantor to protect the grantee against adverse claims that might impair the grantee's title to the land. Thus, the court held that the warranty was merely a promise to make payments in the future, with a charitable deduction available when the payments were actually made.⁶⁵

§ 4.15 CONTRIBUTIONS OF EASEMENTS

As is the case with gifts of real property,⁶⁶ state law will determine the effective date of the contribution of an easement.⁶⁷ In one situation, a partnership purported to convey a conservation easement in 2004, claiming a $2.21 million charitable deduction. A court determined that, under state law, a conservation easement is effective only if it is duly recorded and indexed in the county where the land is situated. Consequently, because the easement transfer was not recorded until 2005, the court rejected the partnership's argument that the easement was contributed in 2004.⁶⁸

A court ruled that the gift of a facade easement to a qualified public charity, resulting in a claimed charitable deduction of $11.4 million, was not deductible because the charity was two years late in recording the deed of easement.⁶⁹ Under state law, the conservation easement did not have any legal effect until it was recorded. The court also held that this state of affairs violated the federal tax law requirement that the restricted gift be in perpetuity.⁷⁰

§ 4.16 CONTRIBUTIONS BY C CORPORATIONS

      The foregoing rules apply with respect to gifts by both individual and corporate donors. Thus, the general rule that a federal income tax charitable contribution deduction arises at the time the contribution is made and for the year in which it is made is equally applicable to individual and corporate donors.

A C corporation⁷¹ that reports its taxable income using the accrual method of accounting may, however, at its election, deduct charitable contributions paid within two and one-half months after the close of its tax year, as long as: (1) the board of directors of the corporation authorized the making of a charitable contribution during the tax year, and (2) the charitable contribution is made after the close of the tax year of the corporation and within the two-and-one-half-month period.⁷²

This election must be made at the time the return for the tax year is filed, by reporting the contribution on the return. There must be, attached to the return, a written declaration that the resolution authorizing the contribution was adopted by the board of directors during the tax year involved, and the declaration must be verified by a statement signed by an officer authorized to sign the return that it is made under penalties of perjury. A copy of the resolution of the board of directors authorizing the contribution must also be attached to the return.⁷³

To satisfy this rule, contributions of property need not be segregated by year and there is no requirement that the donees be identified at the time the resolution is adopted.⁷⁴

§ 4.17 CONTRIBUTIONS BY S CORPORATIONS

Deductions pursuant to the rules pertaining to C corporations⁷⁵ are not available to S corporations,⁷⁶ which are treated the same as partnerships for tax purposes.⁷⁷ (Each shareholder of an S corporation takes into account the shareholder's pro rata share of the corporation's items of income, loss, deduction, or credit.⁷⁸) Rather, an S corporation must report the charitable contribution on its tax return for the year in which the contribution was actually made.⁷⁹ This is because an S corporation generally computes its taxable income in the same manner

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