Charitable gifts of property subject to a mortgage, writing a memorandum to the clients file

You clients are Matt and Lucy Bauer, a married couple. The Bauers owned 100 acres of land near Charlotte, North Carolina. The land was located in an area where a great number of new houses and other buildings were being built. The Bauers purchased the land several years ago as an investment. They intended to sell the land at a profit a few years later, when less undeveloped land would be available in this high demand area. In April of last year, the Bauers learned that the Charlotte Theatre Company (CTC) wanted to build a new theatre building and school in the area where their land was located. As lifelong theatre goers, the Bauers wanted to help CTC, which is a 501(c)(3) charitable organization. They agreed to give 100 acres of land to CTC. The Bauers transferred the land to CTC on June 30th of last year. At the time of the transfer, the land had a fair market value of $500,000 and was subject to a $200,000 mortgage, and the Bauers adjusted basis in the land was $300,000. Required- Is there any authority indicating what, if any, effect the mortgage has on deductibility of the Bauers contribution of the land to CTC. Research this question considering the relevant Code Section, regulations cases and or rulings and write a brief memorandum to the clients file that addresses this question.