Question

Stan, a CPA, contributed the following items:

            1.   Clothing to Goodwill Industries (Cost - $600; FMV on date of contribution - $100)

            2.   Mileage driven on Red Cross Pledge Drive - 200 miles

            3.   100 hours donated to Red Cross as local chapter Treasurer (his professional hourly rate is $200/hour)

      If Stan's AGI is $100,000, his current year charitable contribution itemized deduction is:

      a.   $100.

      b.   $128.

      c.   $628.

      d.   $20,128.

      e.   none of the above.

2.   Sue contributed the following items:

            1.   Cash paid to Central Michigan University - $2,500

            2.   Cost of ticket to attend American Cancer Society Benefit Dinner (Cost, $50; FMV of dinner received, $20)

            3.   Cash paid to a family in Michigan whose home was destroyed by fire - $100

      If Sue’s AGI is $130,000, her current year charitable contribution itemized deduction is:

      a.   $2,650.

      b.   $2,550.

      c.   $2,530.

      d.   $2,500.

      e.   none of the above.

3.   Kathy contributed the following items:

            1.   Cash paid to Haitian charity to help homeless Haitian children - $500

            2.   Cash paid to National Democratic Party - $50

            3.   Cash paid to First Church - $28,000

      If Kathy's current year AGI is $40,000, her charitable contribution carryforward to next year is:

      a.   $0.

      b.   $4,000.

      c.   $4,500.

      d.   $4,550.

      e.   none of the above.

4.   Calvin, a sole proprietor, made the following contributions to qualified charities:

                                        Donee                            Item                       Cost                   FMV
                      Hobbs Medical Center            IBM stock              $ 5,000              $ 25,000

                                   (held 3 years)
                          Homeless Shelter                inventory                  5,000                   8,000

                                 (held 3 months)                       
                              United Way                        cash                     2,000                   2,000

      (Note: a sole proprietor deducts all allowable charitable contributions as an itemized deduction.) If Calvin’s AGI             is $70,000, his charitable contribution itemized deduction is:

      a.   $35,000.

      b.   $32,000.

      c.   $31,000.

      d.   $28,000.

      e.   none of the above.

Answer 1

Charitable contributions are deductible upto 60% of AGI.

Contributions can be made in cash/ check or charged on credit card or property contributed.

Where contribution is in the form of property, deduct lesser of tax basis or FMV.

Exception: For non business investment and long term capital gains property held for over a year, always deduct FMV.

Also for long term property limit is 30% of AGI.

Required 1

Total contribution = $100 for clothing + out of pocket expenses 200miles *0.14 per mile

=$128

Since this is within AGI limit.

So ans would be b. $128

Required 2

Total contribution = Cash $2500 + Cost of ticket less FMV of the dinner received ($50 -$20) = $2530

Since contribution is within AGI limits, answer would be c. $2530

Required 3

Contribution to a political organization or a communist organization is a non deductible contrbution.

Therefore total contribution = $28,000

AGI = $40,000

Maximum contribution allowed to be deducted = 60% of $40,000 = $24,000

Amount of contribution carryover to future years = $28000- $24000 = $4000

So the ans would be b. $4000

Required 4

Contribution of IBM stock is long term capital gains property contribution and thus, the FMV of the same needs to be deducted. Also AGI limit for IBM stock would be 30%

FMV of IBM Stock = $25,000

AGI Limit = 30% of 70,000 = $21,000

Therefore maximum deduction for IBM stock = $21000

Also for inventory and cash contributed , deduction would be = $5000 + $2000 = $7000

Total charitable contribution deduction = $21000 + $7000 = $28000

So the ans would be d. $28,000

For any clarification, please comment. Kindly Up Vote