My understand of the law is that the object should be sold at
auction or given to another non-profit. Returning the object to
the donor, or giving it away, is unethical and possibly illegal.
The reason is because when the donor gave the item--he/she also
took (or was entitled to) a tax deduction for the gift. Giving it
back to the donor is having cake and eating it too, basically.
John Handley
San Francisco