a. Donna donates stock in Chipper Corporation to the American Red Cross on September 10, 2018....

a. Donna donates stock in Chipper Corporation to the American Red Cross on September 10, 2018. She purchased the stock for $24,325 on December 28, 2017, and it had a fair market value of $34,750 when she made the donation.

The stock is treated as (capital gain or ordinary income) property and Donna's charitable contribution deduction is $ ______tax purposes.

b. Assume instead that the stock had a fair market value of $20,850 (rather than $34,750) when it was donated to the American Red Cross. Donna's charitable contribution deduction would be $_______ for tax purchases.

Expert Solution

solution :
The deduction for a contribution of capital gain property is based on its fair market value,while the deduction for a contribution of ordinary income property is equal to the lesser of theadjusted basis or the fair market value

a. Donna donates stock in Chipper Corporation to the American Red Cross on September 10, 2018. She purchased the stock for $24,325 on December 28, 2017, and it had a fair market value of $34,750 when she made the donation.

The stock is treated as (capital gain or ordinary income) property and Donna's charitable contribution deduction is $ ______tax purposes.

Because Donna did not hold the stock for the long-term holding period (December 28, 2015,until September 10, 2016 is not “more than one year”), it is short-term capital gain propertythat is subject to the rules for ordinary income property. Therefore, her deduction is limited to$24325.

b. Assume instead that the stock had a fair market value of $20,850 (rather than $34,750) when it was donated to the American Red Cross. Donna's charitable contribution deduction would be $_______ for tax purchases.

The deduction for a contribution of loss property (FMV is less than adjusted basis) is limited to the fair market value on the contribution date. Therefore, Donna’s deduction is $20850.

ekkarill92 answered 1 year ago

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