Question

#27) A taxpayer donates land to his church. The taxpayer paid $55,000 for the land several years ago. It is worth $75,000 at the time it was donated. This was the only charitable contribution the taxpayer made during the year. If the taxpayer's AGI is $100,000, which of the following could be an accurate statement regarding the taxpayer's charitable deduction for the land?

Group of answer choices

a-The taxpayer deducts $55,000 in the current year

b-The taxpayer deducts $30,000 in the current year and carries over $25,000 to the next tax year

c-The taxpayer deducts $30,000 in the current year and carries over $45,000 to the next tax year

d-Both a. and d

Answer 1

The answer is

c) The taxpayer deducts $30,000 in the current year and carries over $45,000 to the next year.

Explanation :

• When a taxpayer makes donations which are subject to deductions as per IRS, he can deduct the same from Adjusted gross income (AGI).
• There is also a rule for how much you can deduct. The basic rule is that your contributions to public charities, colleges and religious groups can't exceed 50% of your AGI.
• The caps are bit lower for gifts of appreciated properties. In this case, the limit drops to 30%.
• However, if these restrictions limit your write-off in the year of the gift, the excess deduction carries over to next year.

Therefore, fairvalue of land $75,000 is morethan 30% of $100,000 (AGI), the maximum permissible deduction in the current year would be $30,000 and the balance $45,000 could be carried over to the next tax year.