Rev. Rul. 80-233

ISSUE

What is the fair market value of Bibles that are contributed to charity under the circumstances described below?

FACTS

P is a promoter who sells Bibles to individuals. P advises potential customers that they can purchase Bibles at a considerable discount from "retail" price, hold the Bibles for 12 months, and then, by donating them to a qualified charitable organization, claim a charitable deduction for the "retail" price.

In 1979 D purchased from P 500 copies of a single edition of a modern translation of the Bible for a total of 100x dollars. Upon receipt of D's payment of 100x dollars, P furnished D with a statement that the 500 copies of the Bible had a total retail value of 300x dollars.

As part of the purchase agreement, P agreed to periodically furnish D with lists of religious organizations that were interested in receiving a donation of Bibles and for which the use of the books would be related to the organizations' exempt purposes. Pursuant to P's suggestion that only one organization be the recipient of the Bibles, D selected from the list, X, an organization described in section 170(c) of the Internal Revenue Code, to be the recipient. At D's direction, P mailed the Bibles directly to X 13 months after D had purchased them from P. At the time D contributed the Bibles to X, wholesale dealers of Bibles were selling similar lots of Bibles to members of the general public for 100x dollars.

LAW AND ANALYSIS

Section 170 of the Code provides, subject to certain limitations, a deduction for contributions and gifts to or for the use of organizations described in section 170(c), payment of which is made within the taxable year.

Section 1.170A-1(c)(1) of the Income Tax Regulations provides that if a charitable contribution is made in property other than money, the amount of the contribution is the fair market value of the property at the time of the contribution reduced as provided in section 170(e)(1) of the Code and section 1.170A-4(a) of the regulations.

Section 1.170A-1(c)(2) of the regulations provides, in part, that fair market value is the price at which 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.

To determine fair market value, reference is made to the most active and comparable marketplace at the time of the donor's contribution. The most probative evidence of fair market is the prices at which similar quantities of Bibles are sold in arm's-length transactions. See Rev. Rul. 80-69, 1980-1 C.B. 55. The 100x dollars, at which similar lots of Bibles were sold to D and are still being sold to others, is the best evidence of fair market value at the time the Bibles are contributed to X.

HOLDING

The fair market value of the Bibles contributed to X is 100x dollars.