Question

#30)

Assume that in 2019 Taxpayer makes a donation to qualified public charity of real estate held by Taxpayer for investment for five years and having a fair market value of $20,000 on the date of the contribution. Taxpayer's basis in the property is $30,000. How much loss or deduction would be allowable to or recognized by taxpayer as a result of this transaction?

Group of answer choices.

a-There would be no deductible loss allowable with respect to the inherent loss in the property, but taxpayer may take a charitable deduction of $20,000 subject to the adjusted gross income percentage limitation, and provided Taxpayer itemizes deductions.

b-Taxpayer may carry over the loss until Taxpayer makes a bargain sale of other real estate to a public charity.

c-Taxpayer’s allowable charitable income tax deduction would be $30,000.

Answer 1

The correct answer is "A" : There would be no deductible loss allowable with respect to the inherent loss in the property, but taxpayer may take a charitable deduction of $20,000 subject to the adjusted gross income percentage limitation, and provided Taxpayer itemizes deductions.

As per IRS, the taxpayer shall get a deduction for the donation made to a qualifying charity upto the Fair value of the property transferred subject to a maximum of 30% of AGI. Hence in the current case taxpayer will get a deduction of 20,000$, i.e., fair value of property transferred subject to a limit of 30% of AGI.