In: Accounting
1. Charitable contributions. Paolo donated a classic car he owned to the Maldini Family Foundation, a private non-operating foundation. The Foundation's president now uses the car for foundation business. Paolo bought the car 10 years ago for $51,000. It is now worth $55,000. Without taking into account ceiling limitations, how much is the itemized deduction Paolo can claim?
2. Gain. Two years ago, Hyeon won a golden statue in a lottery. At the time, it was worth $10,000. She properly reported all of her income on her tax return that year. She sold the statue for $20,000 in March of this year. How much gross income does Hyeon recognize on the sale?
Question 1
If a car is donated to charity, an income tax deduction for the donation can be claimed if you itemize your deductions on your federal income tax return.
The fair market value (FMV) of the car represents the maximum deduction that can be claimed on one’s federal income tax return.
If the tax deduction claimed for car is greater than $5,000, a written appraisal of the car’s FMV from a qualified appraiser is required.
Analysis-
The fair market value of car contributed by Paolo to the Private Non operating foundation is $55,000.
Hence, the itemized deduction will be $55,000.
For Private non-operating foundations, gifts will be subjet to 20% of AGI limit.
Question 2
If you hold the painting or sculpture for at least three years, the gains you make would be regarded as long-term capital gains.
Since Hyoen held the statue for 2 years, it will come under short term capital asset.
Gross income to be recognised on sale= $20,000- $10,000
=$10,000.