ExpertHard1 markMultiple Choice
CPA · Question 27 · Area IV: Individual Taxation
A taxpayer donated a painting to a public charity (museum) which displayed it. The taxpayer had owned the painting for 5 years. Cost basis was $10,000; FMV was $50,000. The taxpayer's AGI is $100,000. What is the maximum charitable contribution deduction allowed for the current year?
A taxpayer donated a painting to a public charity (museum) which displayed it. The taxpayer had owned the painting for 5 years. Cost basis was $10,000; FMV was $50,000. The taxpayer's AGI is $100,000. What is the maximum charitable contribution deduction allowed for the current year?
Answer options:
A.
$50,000
B.
$30,000
C.
$10,000
D.
$60,000
How to approach this question
1. Determine value: LTCG property put to related use = FMV ($50k). 2. Determine limit: LTCG property limit is 30% of AGI. 3. Calc: 30% * $100k = $30k. 4. Deduction is lesser of Value ($50k) or Limit ($30k).
Full Answer
B.$30,000✓ Correct
For contributions of Long-Term Capital Gain property to a public charity where the use is related to the charity's purpose, the deduction is FMV ($50,000). However, the deduction is limited to 30% of AGI. $100,000 * 30% = $30,000. The remaining $20,000 is carried forward.
Common mistakes
Using the 60% (cash) or 50% (ordinary income property) limits instead of the 30% limit for LTCG property.
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