D.1. Gifts of Investment Property

(1) For taxable years beginning after December 31, 1972, property is treated as held

for investment purposes even though such property is disposed of by the foundation immediately upon its receipt, if it is property of a type which generally produces interest, dividends, rents, royalties, or capital gains through appreciation. See Treas. Reg. 53.4940-1(f)(1).

Examples: Rental real estate, stock, bonds, mineral interests, mortgages, and securities.

(2) Treas. Reg. 53.4940-1(f)(1) was held to be a permissible interpretation of the

statute by the Tax Court in Ruth E. and Ralph Friedman Foundation, Inc. v. Commissioner, 71 T.C. 40 (1978) and the Federal Circuit in Greenacre Foundation v. U.S., 762 F.2d 965 (Fed. Cir. 1985). The Tax Court also held that

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Treas. Reg. 53.4940-1(f)(2)(i)(B), which provides that the basis of donated stock is the basis in the hands of the donors, is valid.