Question

Mortimer is an avid collector of antiques associated with the funeral industry. The local hospital is running a campaign to redecorate and expand their lobby, and as a show of support, Mortimer donates a 19th century horse-drawn hearse in mint condition to the hospital. He purchased several of these hearses 30 years ago for $300 each, but the current estimated market value of the hearse today is in the range of $30,000. The hospital decides to sell the hearse and dedicate the proceeds to the renovation effort. Mortimer's AGI is $50,000. Which of the following statements concerning Mortimer's charitable deduction is correct? Mortimer's deduction for the current tax year will be limited to $25,000. O Mortimer's deduction for the current tax year will be limited to $15,000. At least $5,000 of the deductible amount will have to be carried over to future tax years.

Answer 1

Ans) Assuming that Mortimer is a single individual, amount of tax payable by Mortimer is

$4,453.50+22%*$(50,000-38,700)=$6,939.50

Since, the adjusted Gross Income is $ 50,000 so Mortimer will fall under 22% tax bracket.So his ta deduction will be $4,4453 plus 22% of the amount exceeding $38700. So his tax deduction will be $6,939.50

So, the correct option from the above givern options will be (b) Mortimer's deduction for the current tax year will be limited to $15,000.