Under Section 170 of the Federal Income Tax Code, corporations that donate inventory (i.e. Property sold in the normal course of business) to certain charitable organizations, may receive an additional tax benefit. Section 170(e)(3) provides a deduction for corporate contributions of inventory as much as twice the donor’s adjusted basis in the property.
The charitable deduction for contributions of inventory (from a C corporation) will be the total of the donor’s tax basis in the donated inventory plus one-half of the difference between the inventory tax basis and its fair market value. This is limited to 200% of the inventory tax basis plus any incidental costs (i.e., shipping, warehousing) associated with donating the inventory. If the fair market value of inventory is less than the donor’s tax basis in the donated inventory then the charitable deduction should be equal to the fair market value. *Consult your tax advisor for consideration of this option.