From previous responses...

Since the whole purpose of §170 is to encourage charitable giving, it should not be surprising that Congress decided to provide certain concession for the donation of appreciated properties. That does not, however, mean there are no carve-outs under §170. First, it should be clarified that appreciated stocks are not always deductible at FMV. §170(e)(1)(A) very clearly stipulates that the deductible contributions of short-term capital gain properties are valued at FMV minus "gain that would not have been long-term capital gain". Generally speaking, this would be the donor's cost basis. For ordinary income and long-term capital gain properties, the amount deductible would be governed by §170(e)(1)(B). Under this subparagraph, appreciated stocks with long-term capital gains are not always fully deductible either. Where appreciated stocks are donated to nonoperating private foundations, subparagraph (B)(ii) would require the deduction to be adjusted for what would otherwise be long-term capital gain - the only exception is where the stock is a qualified appreciated stock defined under §170(e)(5)(B). Nevertheless, it should be noted that not all publicly traded securities meet this definition. It's only after the above are considered would you then refer to §170(f)(11) for valuation. For purposes of this subsection, publicly traded securities (which is more broadly defined than qualified appreciated stock) are excepted from needing qualified appraisals where such contributions are valued at more than $5k.

Also, if you read the construct of §170, particularly the subsections cited above, there would have been no need for reference to capital gain properties or adjustments for what would otherwise be short or long term capital gains if the donor would have to recognize income because the taxpayer would then have full basis and could deduct the entire FMV.