In December of each year, Eleanor Young contributes 10% of her gross income to the United...

In December of each year, Eleanor Young contributes 10% of her gross income to the United Way (a 50% organization). Eleanor, who is in the 24% marginal tax bracket, is considering the following alternatives for satisfying the contribution.

	Fair Market Value
(1) Cash donation	$23,000
(2) Unimproved land held for six years ($3,000 basis)	$23,000
(3) Blue Corporation stock held for eight months ($3,000 basis)	$23,000
(4) Gold Corporation stock held for two years ($28,000 basis)	$23,000

Eleanor has asked you to help her decide which of the potential contributions listed above will be most advantageous tax-wise. Evaluate the four alternatives and complete a letter to Eleanor.

Expert Solution

To: Eleanor Young

Date: December 4^th 2018

Sub: Tax advantage of potential contributions

Hello Mrs. Young,

I have analyzed your alternatives that you have for satisfying your contribution requirements. From my analysis and evaluation I suggest that you should sell the Gold Corporation stock and donate the proceeds to the United Way.

This is because in case of donation of cash, the land or the Gold stock there will be a charitable contribution deduction to the tune of $23,000. On the other hand donation of the Blue Corporation stock will lead to a mere $3,000 charitable contribution deduction. Also a direct contribution of Gold Corporation stock is not advised as it will not lead to any tax deductions for the decline in value (from 28,000 to 23,000).

The best alternative in front of you is to sell the Gold stock and give the $23,000 proceeds to United Way. The donation of this proceed will lead to a $23,000 charitable contribution deduction. Also the sale will lead to a capital loss of an amount of $5,000 (23,000-28,000). This capital loss can be offset against capital gains of amount of $2,000 or more that you have earned this year. Even if there is no capital gain for this year you can deduct $3,000 of the capital loss this year and carry the remaining $2,000 over to future years.

Please contact me for further clarifications and suggestions.

Best Regards,

Mr. Bill Trump, CPA

ekkarill92 answered 2 years ago

In December each year, Eleanor Young contributes 10% of her gross income to the United Way...

In December each year, Eleanor Young contributes 10% of her gross income to the United Way (a 50% organization). Eleanor, who is in the 28% marginal tax bracket, is considering the following alternatives for satisfying the contribution. Fair Market Value (1) Cash donation $169,000 (2) Unimproved land held for six years ($25,350 basis) $169,000 (3) Blue Corporation stock held for eight months ($25,350 basis) $169,000 (4) Gold Corporation stock held for two years ($202,800 basis) $169,000 Eleanor has asked you...

C. GrabBag 9. Eriko earns $45,755 per year. She contributes 8% of her income to her...

C. GrabBag 9. Eriko earns $45,755 per year. She contributes 8% of her income to her 401(k) plan at work. In her tax bracket, she would pay 37% of her income in state and federal income taxes. a. How much is she saving this year on her taxes by making these 401(k) plan contributions? b. Suppose that instead of contributing to her 401(k) plan, she decides instead to deposit the same amount of money to a Roth IRA. What would...

9) Eriko earns $45,755 per year. She contributes 8% of her income to her 401(k) plan...

9) Eriko earns $45,755 per year. She contributes 8% of her income to her 401(k) plan at work. In her tax bracket, she would pay 37% of her income in state and federal income taxes. A) How much is she saving this year on her taxes by making these 401(k) plan contributions? B) Suppose that instead of contributing to her 401(k) plan, she decides instead to deposit the same amount of money to a Roth IRA. What would her tax...

Eleanor needs $40,000 a year to live on in retirement net of the income she will...

Eleanor needs $40,000 a year to live on in retirement net of the income she will receive. She will be retiring in 22 years and is funding for a 25-year retirement. The inflation rate is expected to be 3.5 percent a year and the after-tax return on her investments 6 percent. a) How much will she fall short to at the beginning of the retirement period? b) What lump sum will she need at the beginning of the retirement period?...

Prepare an income statement for the year ended December 31, through the gross profit for Baxter...

Prepare an income statement for the year ended December 31, through the gross profit for Baxter Company using the following information: Baxter Company sold 8,600 units at $145 per unit. Normal production is 9,000 units. (Do not round fixed overhead rate calculation when determining fixed factory overhead volume variance.) Standard: 5 yards per unit at $6.30 per yard Actual yards used: 43,240 yards at $6.25 per yard Standard: 2.00 hours per unit at $15.00 Actual hours worked: 16,950 at $14.90...

A 50 year old employee contributes 20000 per year to her 401k, and her employer matches...

A 50 year old employee contributes 20000 per year to her 401k, and her employer matches her contributions by 40%. The investment company has provided her with two options: Option 1 Option 2 Equity 60% 40% Bond 30% 40% Money Market Fund 10% 20% The employee wants to retire at 65. The average rates of return presented are 5% on equity, 3% on bonds, and 1% on money market funds. Calculate the total amount of money at the time of...

10. Louise McIntyre’s monthly gross income is $2,000. Her employer withholds $400 in federal, state, and...

10. Louise McIntyre’s monthly gross income is $2,000. Her employer withholds $400 in federal, state, and local income taxes and $160 in Social Security taxes per month. Louise contributes $80 each month for her IRA. Her monthly credit payments for VISA and MasterCard are $35 and $30, respectively. Her monthly payment on an automobile loan is $285. a. What is Louise's debt payments-to-income ratio? (Enter your answer as a percent rounded to 2 decimal places.) Debt payments-to-income ratio...

What is Anne’s total gross income if: 1) her employer reimbursed her for $100 of her...

What is Anne’s total gross income if: 1) her employer reimbursed her for $100 of her job related moving expenses; 2) she had a $200 gain when she sold her home after living in it for 10 years; and 3) she saved $300 by having her son at her employer’s daycare facility? What is Mark’s total gross income if: 1) he had a $100 gain from selling his home he owned for less than 2 years because someone broke into...

(Deferred Income Taxes) This year, a company has each of the following income statement items: Gross...

(Deferred Income Taxes) This year, a company has each of the following income statement items: Gross profits on installment sales. Revenues on long-term construction contracts. Estimated costs of product warranty contracts. Premiums on officers’ life insurance policies with the company as beneficiary. Indicate where deferred income taxes are reported in the financial statements. Specify when deferred income taxes would need to be recognized for each of the items above, and indicate the rationale for such recognition.

Determine the proper tax year for gross income inclusion in each of the following cases A...

Determine the proper tax year for gross income inclusion in each of the following cases A cash basis landlord makes new tenants pay first and last month’s rent at the start of the lease. How does the landlord report these items? Purple Corporation, an exterminating company, is a calendar year taxpayer. It contracts to provide service to homeowners once a month under a one- two- or three-year contact. For financial reporting purposes, Purple reports the income ratably over the months of the contract....

Question