Question

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

Donee	Item	Cost		FMV
Hobbs Medical Center	IBM stock	$	6,000	$	32,000
State Museum	Antique painting		5,500		3,300
A needy family	Food and clothes		500		300
United Way	Cash		18,000		18,000

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 $150,000.

b. Calvin’s AGI is $150,000, but the State Museum told Calvin that it plans to sell the painting.

c. Calvin’s AGI is $74,000.

e. Calvin’s AGI is $150,000, but the painting is worth $40,000.

Answer 1

Solution

tems	Property	In this case deduction before limit	Allowable limit
IBM Stock	Capital gain	$32000	30% of AGI
Painting	Cost > FMV	$3300	50% of AGI
Food and Clothes	Not qualified charity
Cash	Ordinary income	$18000	50% of AGI

a) Calvin’s AGI is $150,000

Charitable contribution deduction	$53,300
Carryover	$0

Explanation:

All the contributions are deductible except the donation to the needy family. This donation will not qualify for a charitable deduction because the family is not a qualified charity.

The IBM stock is capital gain property, so Calvin can deduct the FMV of the stock ($32000) subject to a 30% of AGI ($150000 * 30% = $45,000) 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 ceiling ($150000 * 50% = $75,000).

Calvin’s cumulative donations are $53,300 ($32,000 + $3,300 + $18000), which does not approach the 50% limit.

b. Calvin’s AGI is $150,000, but the State Museum told Calvin that it plans to sell the painting.

Charitable contribution deduction	$53,300
Carryover	$0

Explanation:

Because the painting is not capital gain property.

Calvin’s cumulative donations are $53,300 ($32000 + $3,300 + $18,000), which does not approach the 50% limit.

Similar to above explanation.

c. Calvin’s AGI is $74,000

Charitable contribution deduction	$37,000
Carryover	$16,300

Explanation:

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

(1) The value of the stock up to the 30% AGI limit ($74,000 * 30% = $22,200 or

(2) The remaining amount of deduction to reach the 50% limit. ($37,000 - $3,300- $ 18,000 = $15,700)

Hence, Calvin can deduct $37,000 this year consisting of cash of $18000, painting of $3,300, and the stock of $15,700.

The remaining value of the stock $16,300 ($32,000 - $15,700) is carried over to next year subject to the 30% of AGI limit.

e. Calvin’s AGI is $150,000, but the painting is worth $40,000

Charitable contribution deduction	$38000
Carryover	$2000

Explanation:

FMV changes to $40,000 property type also change to capital gain property.

So,

The IBM stock is capital gain property and the painting is also capital gain property.

Hence, Calvin can only deduct the value of the stock subject to the lesser of

(1) The value of the stock up to the 30% AGI limit ($150000 * 30% = $45,000) or

(2) The remaining amount of deduction to reach the 50% limit. ($75,000 - $18000 = $57,000)

Hence, Calvin can deduct $38000 this year consisting of cash of $18,000, painting and the stock of $45,000.

The remaining value of the stock $27000 [($32000 + $40,000) - $45,000] is carried over to next year subject to the 30% of AGI limit.

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