Thirty years ago, Jason found a painting at a yard sale that he thought would look great in his college dorm room. He bought the painting for $5. After the painting had been hanging in his dorm room for a few months, his roommate, an art history major, realized that the painter was a relatively famous artist. Over Christmas break, Jason took the painting home and had it appraised. Since that time, because of its substantial value, the painting has been secured in storage.
Jason is now nearing retirement and is considering what to do with the painting. One alternative is to sell the painting. Another alternative is to donate the painting and take a charitable contribution deduction. He has been approached by the museum that houses a significant collection of the painter's work, and it would like to acquire the painting that Jason owns. Jason is considering that option, because he hasn't had much in the way of tax deductions since he paid off his mortgage a few years ago.
Jason knows that for regular tax purposes, the full fair market value of the painting will be allowed as a charitable deduction (subject to AGI limitations), because the painting is a long-term capital gain asset and the museum will display the painting as a part of its collection. However, he is concerned that the difference between his basis in the painting and the painting's fair market value will create a preference for AMT purposes, which would substantially reduce the tax benefit of the deduction.
Advise Jason on the appropriate treatment of charitable contributions of appreciated property for AMT purposes.