Earlier today, I blogged the case of the Herbstreits who have sued the IRS for denying a charitable deduction for donating their home (but not the related property) to the local fire department for training purposes. Since then, I’ve had a few interesting conversations (including on twitter) about the value of the deduction. The IRS generally defines the value of a charitable deduction as the lesser of your basis in the item (meaning what you paid for the item) or the fair market value. Yes, it’s actually a little more complicated than that, but for our purposes, it’ll do.
Those conversations of earlier today lead to my Fix the Tax Code Friday question:
How should the IRS value an item for the purposes of charitable deductions? Should the cost of labor be included (it currently isn’t) or should the IRS always the replacement value of the item? Does it matter what the item is?