Question

Required information The following information applies to the questions displayed below.] Calvin reviewed his cancelled checks and receipts this year for charitable contributions, which included an antique painting and IBM stock. He has owned the IBM stock and the painting since 2005. Donee Hobbs Medical Center State Museum A needy family United Way Item IBM stock Antique painting Food and clothes Cash Cost FMV $ 7,000 $ 42,000 6,000 3,600 600 360 28,000 28,000 Calculate Calvin's charitable contribution deduction and carryover (if any) under the following circumstances. (Leave no answer blank. Enter zero if applicable.) a. Calvin's AGI is $200,000. Charitable contribution deduction Carryover b. Calvin's AGI is $200,000 but the State Museum told Calvin that it plans to sell the painting. Charitable contribution deduction Carryover c. Calvin's AGI is $99,000. Charitable contribution deduction Carryover d. Calvin's AGI is $200,000 and Hobbs is a nonoperating private foundation. Charitable contribution deduction Carryover e. Calvin's AGI is $200,000 but the painting is worth $70,000. Charitable contribution deduction Carryover

Answer 1

Before answering the question, I would like to provide some clarity on the basic concepts :

1. Charitable contribution deduction is allowed for capital gain property at its fair market value as on date of donation subject to lower of following :

a) 30% of AGI

b) Remaining deduction out of 50% AGI Limit after subtracting other deductions

2. Total 50% of AGI is allowed as charitable contribution deductions

3. Deduction is not allowed for donation made to individuals (needy family) as they do not qualify as qualified donation.

4. Antique painting referred to in question is not a capital gain property since it has not appreciated in value.

Answer :

A.

50% AGI Limit = 200,000*50% = 100,000$
Deductions covered under 50% Limit :
Particulars	Amount ($)
Cash contribution	28,000
Antique Painting	3,600
Remaining contribution deduction Limit	68,400
Calculation of Capital gain property charitable deduction
Limit of deduction : Lower of
a) 30% of AGI = 60,000$
b) 50% AGI Limit = 68,400$
Hence, Limit for deduction = 60,000$
FMV = 42,000$
Actual deduction to be allowed for cpaital gain property = 42,000$
Therefore total charitable contribution deductions are as follows :
Particulars	Amount ($)
Cash contribution	28,000
Antique Painting	3,600
IBM Stock	42,000
Charitable contribution deductions	73,600
Carryover	0

B. The answer will be same as A because as described in point 4 of basic concepts above, painting is not a capital gain property.

C.

50% AGI Limit = 99,000*50% = 49,500$
Deductions covered under 50% Limit :
Particulars	Amount ($)
Cash contribution	28,000
Antique Painting	3,600
Remaining contribution deduction Limit	17,900
Calculation of Capital gain property charitable deduction
Limit of deduction : Lower of
a) 30% of AGI = 29,700$
b) 50% AGI Limit Remaining = 17,900$
Hence, Limit for deduction = 17,900$
FMV = 42,000$
Actual deduction to be allowed for cpaital gain property = 17,900$
Therefore total charitable contribution deductions are as follows :
Particulars	Amount ($)
Cash contribution	28,000
Antique Painting	3,600
IBM Stock	17,900
Charitable contribution deductions	49,500
Carryover	24,100	(42,000-17,900)

D.

Even though IBM stock is a capital gain property, since the donation is now being made to a nonoperating private foundation, the donation will be limited to lower of : a) 20% AGI limit; or b) Remaining 50% AGI Limit.

Accordingly the deduction and carryover has been computed as below :

50% AGI Limit = 200,000*50% = 100,000$
Deductions covered under 50% Limit :
Particulars	Amount ($)
Cash contribution	28,000
Antique Painting	3,600
Remaining contribution deduction Limit	68,400
Calculation of Capital gain property charitable deduction
Limit of deduction : Lower of
a) 20% of AGI = 40,000$
b) 50% AGI Limit Remaining = 68,400$
Hence, Limit for deduction = 40,000$
FMV = 42,000$
Actual deduction to be allowed for cpaital gain property = 40,000$
Therefore total charitable contribution deductions are as follows :
Particulars	Amount ($)
Cash contribution	28,000
Antique Painting	3,600
IBM Stock	40,000
Charitable contribution deductions	71,600
Carryover	2,000	(42,000-40,000)

E.

Now that the painting has appreciated, it will be counted as a capital gain property and hence now we have 2 capital gain properties : IBM stock and painting. Hence deduction has been calculated as below :

50% AGI Limit = 200,000*50% = 100,000$
Deductions covered under 50% Limit :
Particulars	Amount ($)
Cash contribution	28,000
Remaining contribution deduction Limit	72,000
Calculation of Capital gain property charitable deduction
Limit of deduction : Lower of
a) 30% of AGI = 60,000$
b) 50% AGI Limit Remaining = 72,000$
Hence, Limit for deduction = 60,000$
FMV = 42,000+70,000 = 112,000$
Actual deduction to be allowed for cpaital gain property = 60,000$
Therefore total charitable contribution deductions are as follows :
Particulars	Amount ($)
Cash contribution	28,000
Capital Gain property	60,000
Charitable contribution deductions	88,000
Carryover	52,000	(112,000-60,000)