Question

Required information Problem 6-44 (LO 6-2) (The following information applies to the questions displayed below.] In addition to cash contributions to charity, Dean decided to donate shares of stock and a portrait painted during the earlier part of the last century. Dean purchased the stock and the portrait many years ago as investments. Dean reported the following recipients: Charity State University Red Cross State History Museum City Medical Center Property Cash Cash Antique painting Dell stock Cost FMV $19,400 $19,400 16,700 16,700 5, 440 99,600 72,000 61,000 Problem 6-44 Part-c c. Suppose Dean is a dealer in antique paintings, and he held the painting for sale before the contribution. What is Dean's charitable contribution deduction for the painting in this situation (ignoring AGI limitations)? Charitable contribution deduction

Answer 1

Solution:

Firstly state history museum should be a qualified organization for the purposes of charitable contribution deduction, as it is a United states possession made exclusively for public purposes.

If property other than cash is made to a qualified organisation then generally the fair market value of the property can be considered for calculation of charitable contribution deduction. In this case paintings are inventory for Dean, hence Dean will be able to deduct only the basis of the painting.

Maximum deduction wil be;

State university- cash - 50% of $19400 = $9,700 - qualifying organisation with 50% benefit

Red cross- cash - 50% of $16700= $8,350- same reason

City medical center - 50%- Dell stock is in loss so not capital gain property - so FMV or basis- Lower would be considered- $61000 so 50% of that = $30,500

State history museum - 50% of 5440 as explained above i.e. $2720

Total deduction = 9,700+8,350+30,500+2,720=51,270