Rev. Rul. 74-348

Advice has been requested whether a taxpayer is entitled to a charitable contribution deduction in the manner and to the extent provided by section 170 of the Internal Revenue Code of 1954 under the circumstances described below.

A charitable organization described in section 170(c)(2) of the Code sponsored a series program featuring six different theatrical performances. In September 1972, the taxpayer, an individual, purchased a season ticket for the series. Such a season ticket cost $18, or an average of $3 for each individual performance. However, a ticket for an individual performance sold to the public for $5. In October 1972, three weeks prior to the scheduled performance of the first play, the taxpayer donated a ticket for that performance to the organization for resale.

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

Section 170(e)(1)(A) of the Code provides, in part, that the amount of any charitable contribution of property shall be reduced by the amount of gain which would not have been long-term capital gain if the property contributed had been sold by the taxpayer at its fair market value at the time of such contribution.

In the instant case, the taxpayer made a contribution of property which he had held for less than 6 months. If the taxpayer had sold his ticket for an individual performance instead of donating it to the charitable organization, the sale would have given rise to short-term capital gain to the extent its fair market value ($5), which, in this case, was its cost to the public for an individual performance, exceeded his cost or adjusted basis ($3). The resulting $2 gain would not have been long-term capital gain.

Accordingly, whether or not the ticket donated by the taxpayer was in fact resold by the charitable organization described in section 170(c)(2) of the Code, the taxpayer is entitled to a charitable contribution deduction in the manner and to the extent provided by section 170. Since the ticket has a fair market value of $3 or more, the taxpayer may deduct the amount of $3, which was his cost of the ticket.

In Rev. Rul. 67-246, 1967-2 C.B. 104, it is stated that the test of deductibility of payments to charitable organizations in connection with admission to certain fund raising activities for charity is not whether the right to admission is exercised but whether the right was accepted or rejected by the taxpayer. In Example 3 of Rev. Rul. 67-246, a taxpayer paid $5 for a ticket to a concert. The taxpayer in that Revenue Ruling had no intention of using the ticket when he acquired it and did not, in fact, attend the concert. However, that taxpayer did accept the right to admission and, therefore, no part of the $5 payment was deductible as a charitable contribution. The mere fact that the ticket to the concert was not used did not entitle the taxpayer to any greater right to a deduction than if he did use it.

In the instant case, the donation of the taxpayer's ticket for an individual performance amounted to an absolute relinquishment of the taxpayer's right to admission.

Rev. Rul. 67-246 is distinguished.