Handouts are never the answer. In time, handouts make the donor weary and the recipients resentful and angry that they are dependent on the aid. If the donor acknowledges the weariness and sees the resentment, most donors then add restrictions in a doe-eyed way to incentivize the recipient to independence. That usually causes the recipient to transition abruptly from resentment to hostility. The author then comments on how this "is providing the proverbial fish without teaching the recipient how to fish." It has been my experience in working directly in 35 different countries that aid is more like: "Give a country a fish, it eats for a day; teach a country how to fish and you lose your leverage." Aid, even directed major-project aid, is not the answer, neither is leverage. Education and true independence–mental, economic and political–is the only answer.

The second premise is that developed financial products such as investment, mortgages and insurance will also save the day. Nothing could be further from the truth. In a country where the rule of law is either absent or suspect and open for bid, investment opportunities, measured by any standard, are worth zero.

NOMINATIONS SOUGHT FOR WORTH’S BEST ATTORNEYS 2006 Has your personal lawyer been invaluable to your financial or emotional health? Would you like to give your counselor the recognition he or she deserves? Worth is seeking nominations for our list of the best lawyers serving affluent individuals in their personal and family needs. A feature on our findings–highlighting the best legal minds in areas ranging from trusts and estates to matrimonial law and philanthropy–will appear in our December issue. Clients who wish to recommend an attorney for consideration are requested to complete the nomination form by June 30.   Attorneys who wish to be considered must complete the application form by July 28. Both forms and instructions can be found at worth.com.

Thus, the only way to prosper in a region like this is not to seek order, but rather to design your profit-seeking venture on chaos. The most successful venture in chaos is crime: taking from those who have because there are no enforcement rules. Those who are profiting during chaos do not want order installed; it ruins their business model just as surly as chaos ruins a business model based upon order. Crops do not grow in the desert because there is no water. Businesses do not grow in Palestine because there is no order. Palestinian leaders blame other nations for their failings, when the failings are from within. Further, they realize that the imposition of order will get them killed. Order is bad for business and Palestinian leader longevity.

Palestine is not unique, just a more visible and violent failure. There are many other countries in the same mire. Before Palestine can grow economically, order and the real rule of law must be established. The cure is a bitter pill and can only come from the Arab world. Order will never come from within. Fifty-plus years have shown us that it must be imposed from without.

L. Burke Files
Financial Examinations & Evaluations, Tempe, Ariz.

Charitable Donations

Dear Editor:
In the April 2006 issue, Eli Uncyk wrote a letter commenting on the December 2005 article, "After the Gavel Falls" in which he suggests donating the necklace would enable the donor to claim a charitable deduction based on the appraised value. This deduction at fair market value is rarely the case.

IRC Section 170(e)(1)(B) reduces the charitable contribution deduction by the appreciation in the value of contributed property, even if the taxpayer’s gain on a sale would be long-term capital gain rather than ordinary income or short-term capital gain. A gift of appreciated tangible personal property, if the donee’s use is unrelated to its exempt purposes or functions, will be limited generally to the donor’s basis (or FMV if lower).

Because assets gifted to a charity auction will not be used for the charity’s exempt purpose, the donor’s charitable contribution is limited to the lower of fair market value or basis.

In addition, a further hurdle applies if the charity is a private foundation. A contribution of appreciated property (other than publicly traded stock) to a private foundation is limited to the lower of fair market value or basis.

Richard Pon
Lautze & Lautze, San Francisco

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