ExpertHard1 markMultiple Choice
CPA · Question 26 · Area IV: Individual Taxation
A taxpayer has Adjusted Gross Income (AGI) of $100,000. During the year, the taxpayer donated a piece of artwork to a public charity (a museum) that will display the art. The taxpayer had held the art for 5 years. The art had a basis of $10,000 and a Fair Market Value (FMV) of $40,000. What is the maximum charitable contribution deduction allowed for the current year?
A taxpayer has Adjusted Gross Income (AGI) of $100,000. During the year, the taxpayer donated a piece of artwork to a public charity (a museum) that will display the art. The taxpayer had held the art for 5 years. The art had a basis of $10,000 and a Fair Market Value (FMV) of $40,000. What is the maximum charitable contribution deduction allowed for the current year?
Answer options:
A.
$10,000
B.
$30,000
C.
$40,000
D.
$50,000
How to approach this question
Step 1: Determine value (FMV if LTCG + Related Use). Step 2: Apply limit (30% of AGI for LTCG property).
Full Answer
B.$30,000✓ Correct
For contributions of Long-Term Capital Gain property to a public charity where the property is put to a related use, the deduction is the FMV ($40,000). However, the deduction is limited to 30% of AGI. $100,000 * 30% = $30,000. The remaining $10,000 is carried forward.
Common mistakes
Using the 50% or 60% limit applicable to cash.
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