We donated depreciated equipment worth more than its basis. Can we deduct fair market value without adjustment?
A donated business asset's deduction can be reduced by gain that would not be long-term capital gain if the asset were sold at fair market value.
By AE Tax Advisors Team · Updated October 29, 2026
A donated business asset's deduction can be reduced by gain that would not be long-term capital gain if the asset were sold at fair market value. Depreciation recapture can therefore limit a deduction that the owner expected to equal market value. The asset's basis and depreciation history remain essential.
A specific business-owner situation
A business donates equipment with a low adjusted basis and a higher resale value. The donor cannot assume the appreciated-property rule for long-held stock gives the same deduction for depreciable equipment.
Illustrative example, not a client result.
What to establish before filing
- Establish adjusted basis and market value.
- Calculate hypothetical sale character including recapture.
- Apply contribution limits and substantiation requirements.
Which fact changes the answer?
A long-held capital asset without ordinary-income reduction differs from depreciated operating equipment. The gain character changes the deductible amount.
A mistake to avoid
Do not treat all appreciation as long-term capital gain without considering recapture.
Records that support the decision
- Original asset cost.
- Depreciation history.
- Valuation and donation records.
The decision to document
Prepare the deduction computation before completing the donation reporting and remove the asset consistently from the business books.
Business-owner tax planning and preparation scope · Discuss advisory scope with AE
Related questions
- Our business donated directly to a foreign charity. Does its nonprofit status guarantee a U.S. deduction?
- Our business donation must be refunded if a charity cancels its project. Is the deduction complete now?
Sources and editorial context
General educational information prepared with AI assistance. No individual professional review is claimed. Apply the relevant tax-year rules to the actual records. Editorial policy · AI disclosure.