Question 1

In Year 1, a taxpayer donates a piece of artwork to a public charity (50% limit organization). The artwork has a fair market value (FMV) of $100,000 and an adjusted basis of $20,000. The taxpayer has held the artwork for 5 years. The charity uses the artwork for its exempt purpose (related use). The taxpayer's AGI is $200,000. What is the maximum charitable contribution deduction the taxpayer can claim in Year 1?

Accepted Answer

1. Determine property type: Long-term capital gain property (held > 1 year).
2. Determine valuation: FMV ($100,000) because it is related use.
3. Determine AGI limitation: For LTCG property to 50% org, limit is 30% of AGI.
4. Calculate limit: $200,000 * 30% = $60,000.
5. Compare contribution amount ($100,000) to limit ($60,000). Deduction is lesser.

Question 2

What mistakes do candidates make on this CPA question?

Accepted Answer

Applying the 50% limit instead of the 30% limit, or using basis instead of FMV for related-use tangible personal property.

How to approach this question

Full Answer

Common mistakes

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