Question

Calvin reviewed his cancelled checks and receipts this year for charitable contributions, which included a painting and IBM stock. He has owned the IBM stock and painting since 2005.

Donee	Item	Cost		FMV
Hobbs Medical Center	IBM stock	$	6,200	$	34,000
State Museum	Antique painting		5,600		3,360
A needy family	Food and clothes		520		310
United Way	Cash		20,000		20,000

Calculate Calvin's charitable contribution deduction and carryover (if any) under the following circumstances. (Leave no answer blank. Enter zero if applicable.)

a. Calvin’s AGI is $160,000.
Charitable contribution deduction:
Carryover:

b. Calvin’s AGI is $160,000 but the State Museum told Calvin that it plans to sell the painting.
Charitable contribution deduction:
Carryover:

c. Calvin’s AGI is $79,000.
Charitable contribution deduction:
Carryover:

Answer 1

Answer:

A)

Calvin can deduct $57360. All the contributions are deductible except the donation of the needy family. This donation will not qualify for a charitable deduction because the family is not a qualified charity(in contrast, a donation of food and clothes to a qualifying organization, such as the Red cross, would qualify). The IBM stock is capital gain property. so calvin can deduct the FMV of the stock $34000 subject to a 30% of AGI ($48000) Ceiling. The painting is not capital gain property because it has not appreciated in value. Hence calvin can only deduct the value of the painting subject to the 50% of AGI ($80000). Calvin cumulative donations are $57360, which does not approach the 50% limit,

Calvin AGI is &160000

50% AGI Limit $80000

=> Determine the Decution from 50%

50% AGI limit is $80000

23360 = 20000 + 3360

So deduct 23360

=> Determine deduction from 30% donations limit is lesser of

calvin 30% AGI is 48000

50% AGI - 23360 = 80000 - 23360 = 56640

30% limit is less so we deduct the $34000

The IBM stock is capital gain property, so calvin can deduct the FMV of the stock ($34000) subject to a 30% of AGI ($48000) ceiling.

Total Deduction is 23360 + 34000 = $ 57360.

b) No difference with a. Because of the painting is not capital gain property.

c) The ibm stock is capital gain property and the painting is not capital gain property. Hence, calvin can only deduct the value of the stock subject to the lesser of the value of the stock up to the 30% AGI limit ($48000)

50% AGI limit $40000

50% contributions $20000

50% contributions - painting $3360

total contributions $23360

Max remaining contributions to reach 50% 16640

Calvin deduct 40000 this year consisting of cash of $20000, painting $3360 and the stock is 16640.

The remaining stock is $17360 (34000 - 16640) is carried over to next year subject to the 30% AGI limit.