Category: Deductions & Credits; Charitable Contributions
Subject: Carryover of Charitable Contributions
Title: Designating Carryovers to be Used: AMT vs. Non-AMT
IRC Sections: 170
Filename: 1240.html
Date Produced: 06/95

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Background
Individual taxpayer (TP) has made large charitable contributions over the years such that there is a considerable contribution carryover. The amounts subject to carryover relate to property contributions some of which would be subject to AMT on the difference between the fair market value and the basis of the contributed property. Other property contributions giving rise to carryover amounts are not subject to AMT on the appreciation in the property.

Issue
Can TP control which contribution carryovers are utilized in a given year? In essence can TP designate that carryovers subject to AMT are foregone in favor of using other carryover amounts not subject to AMT?

Answer
TP may not control the utilization of the carryover.

Discussion
Internal Revenue Code Section 170(d) provides the rules for dealing with carryovers of charitable contributions. The language of the statute is very precise and very clear.

"...if the amount of charitable contributions described in subsection (b)(1)(A) payment of which is made within a taxable year (hereinafter in this paragraph referred to as the "contribution year") exceeds 50 percent of the taxpayer's contribution base for such year, such excess shall be treated as a charitable contribution described in subsection (b)(1)(A) paid in each of the 5 succeeding taxable years in order of time..." [Emphasis added.]

In essence, any charitable contribution in excess of the applicable limitation is treated as a contribution made in a subsequent year to be absorbed or not based on the limitations applicable to the subsequent year and (after consideration of current-year amounts) in the order the contributions were made.

The passage set forth above deals with 50% limitation amounts. Section 170(b)(1)(B) flush language provides that the carryover rules applicable to 50% amounts shall be applied to non-50% amounts as well.

I think the statute tells us precisely what to do and when to do it. It does so in clear and unequivocal language. I cannot see any element of choice whatsoever in this language.

The regulations at Section 1.170A-10 repeat the language of the statute verbatim. You mentioned various instances in which the phrases "may be carried over" or "may be deducted" are used. There are various examples of carryovers in the regulations in which the language "the taxpayer may deduct" is used in the context of a carried over amount. I see the same language used in commentary in the various tax services.

I am completely unmoved by the existence of this language. Obviously, tax service commentary is not authoritative. Secondly, the context in which the "may" language is used in the regulations is that of an example. It is clear to me that this is simply loose use of language particularly given the fact that the regulation repeats verbatim the "shall" language set forth in the statute. Moreover, where a statute is clear on its face, and this one in my opinion certainly is, one need look no further.