Did you pay income tax on a domain that was subsequently valued much higher than the amount you paid for it? (that would be akin to when Oprah Winfrey gave away cars on her show and the IRS immediately said to the recipients, "Hey, you just realized $30,000 in net income so you owe us $7,500 in income taxes; so unless you are claiming the overage in the appraised value and have paid taxes on it, then no value has been established for it and there is nothing to write off). If not, then you cannot legitimately write off the donation of any amount greater than what you paid for it. You can never deduct more than you really paid.
The same would hold true for a diamond broker who finds a $1,000,000 diamond while on vacation in Arkansas, and then later loses it or sells it for one dollar. If he paid nothing for it, he can deduct nothing for it (except diamonds are insurable, but I don't know about domain names in the event you "lose" or misplace one). But of course if he paid $1 million and then sold it for a dollar, that is a different story; he would have deducted what he paid for it on his income taxes as a business expense during the year he purchased it.
Actually, to donate a domain name might be less advantageous of a write-off than keeping it and having it classified as an actual business expense because many charitable contributions are allowed only 50% of the amount of the donation.
Keeping it simple is always best. Once I paid my CPA $75.00 to amend my tax return which netted me an additional $50.00 refund. The IRS and I both lost on that one, but at least my CPA was happy
Sometimes you can find good answers at
www.irs.gov.
