Question

Problem #1

A. Linus, who has AGI of $96,500, owns stock Schultz Corporation with a basis of $32,500. He donates the stock to a qualified charitable organization on December 11, 2017. What is the amount of Linus’ charitable contribution deduction on his 2017 Schedule A, assuming that he purchases the stock on May 30, 2017, and the stock had a fair market value of $34,275 when he made the donation, and assuming that he makes no charitable contribution elections?

B. Assume the same facts as in A., except that Linus purchased the stock on May 30, 2010. What is the amount of Linus’ charitable contribution deduction reported on his 2017 Schedule A, assuming he makes no charitable deduction reported on this 2017 Schedule A, assuming he makes no charitable contribution elections?

C. Lucy, who has AGI of $125,000, contributes a Picasso painting, for which she paid $22,000, to the United Way, a qualified charitable organization. She has owned the painting for several years and it now has a value of $46,000 at the of the contribution. The United Way sells the painting immediately for $50,000 and informs reported on her 2017 Schedule A, assuming she makes no charitable contribution elections?

Answer 1

A) Since it is short term deduction will be fair market value of share less short term gain i.e.

$34,275-($34,275 - $32,500) = $32500

$32500*28% tax = Tax saving 9100

B) When appreciated securities held for more than a year are donatedthe donor generally enjoys an income tax charitable deduction for the asset’s full fair market value and avoids tax on the capital gain.

$34275*28% tax = Tax saving 9597

C) To claim deduction on donation of art work some condition need to be fulfilled

i) Donated to Public Charity formed within state

ii) You should have owned art work for more than a year

iii) Donation may be used in way it perpetuates the charity's charter. If the intent from the beginning is for the charity to sell the work, the donation will not qualify for tax deduction under the related-use test.

iv) Charity must agree to keep the property for 3 year

v) To qualify for a tax deduction for artworks worth more than $5,000, the donor must obtain a qualified appraisal

vi) In addition to meeting all these criteria, you must also fit the classification of an art collector or investor as defined by the IRS in order to to claim a tax deduction. If you're an art dealer or an artist, you are not entitled to take deductions on charitable donations of artwork