I'll give my best interpretation of the situation.
My understanding is that yes, when you donate land, for the purposes of the donation, the land is assessed at fair market value. Then you are taxed on the capital gains between purchase and the donation, but you are given a tax credit for a portion of the value that you have donated to the charitable organization. In order to assess the value that you contributed, yes, it is my understanding that it is at a fair market value.