Ms. Prince wants to create a scholarship in honor of her parents at the law school...

Ms. Prince wants to create a scholarship in honor of her parents at the law school from which she received her degree. She could endow the scholarship with $500,000 cash or with $500,000 worth of marketable securities with a cost basis of $318,000. If her AGI is $1.8 million, compute the after-tax cost of the two endowment options. Use Individual tax rate schedules. (Enter your answers in dollars not in millions of dollars.)

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Expert Solution

An overview of Section 170(b)

Charitable contributions are deductible as itemized deductions.

The amount of charitable contributions an individual can deduct in any one tax year is limited depending on the types of organizations to which the contributions were made, the kinds of property contributed, and the amount or value of the donated property.

Generally, five percentages-of-AGI (adjusted gross income) limitations can apply: two 50% limitations, two 30% limitations, and the 20% limitation .

Option 1:

The contricution is in cash form. Deductions are not to exceed 50% of AGI

Option 2:

The contribution is in capital asset form.

Contributions of capital gain property are liable to decutions to 30% charities,

Since similar amount of deduction is available. Both the options are viable.

Tax amount shall be $470969.95.

ekkarill92 answered 1 year ago

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