Question

16.

In addition to cash contributions to charity, Dean decided to donate shares of stock and a portrait painted during the earlier part of the last century. Dean purchased the stock and portrait many years ago as investments. Dean reported the following recipients:

Charity	Property	Cost		FMV
State University	Cash	$	16,000	$	16,000
Red Cross	Cash		15,000		15,000
State History Museum	Painting		5,100		86,000
City Medical Center	Dell stock		38,000		27,000

b. Assume that Dean’s AGI this year is $200,000. Determine Dean’s itemized deduction for his charitable contributions this year and any carryover.

Deduction:

Carryover:

    

Answer 1

a. The maximum amount:

Cash contributions - $31,000 (16000+15000)

Property donations - $113,000. Deduction for property is Fair Market Value (FMV) if the property is long-term capital gain property and either intangible (the stock) or related to the charity’s exempt function. Hence, the value of the antique is deductible.

Stock – $27,000 (FMV) - Because the stock has declined in value it is not considered to be capital gain property. Deduction for this donation is the lesser of FMV or basis.

b. Dean has contributed to public charities and he can deduct all of his cash contributions and the value of the stock because the total does not exceed the 50 % AGI limit. Stock is subject to the 50% of AGI limit and not 30% AGI limit because it is ordinary income due to the fact its basis exceeds its value. Thus, Dean can deduct the lesser of

1. Value of the antique up to the 30% AGI limit ($60,000)

200000*30%

2. Remaining amount of deduction to reach the 50% limit ($28,500 calculated below).

Hence, Dean can deduct $100,000 this year consisting of cash of $31000,stock of $27,000, and the antique of $42000. The remaining value of the antique$44000 ($86,000 - $42000) is carried over to next year subject to the 30% of AGI limit.

50% AGI limit $ 100,000

50% Contributions - cash $ 31000

50% Contributions – Stock + 27000

Total 50% contributions - 58000

Maximum remaining contribution to reach 50% - $42000