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 $5,000 $22,000 5,000 3,000 400 250 8,000 8,000 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 $100,000. Charitable contribution deduction Carryover

Answer 1

Answer -

Here,

Items	Property	In this case deduction before limit	Allowable limit
IBM Stock	Capital gain	$22000	30% of AGI
Painting	Cost > FMV	$3000	50% of AGI
Food and Clothes	Not qualified charity
Cash	Ordinary income	$8000	50% of AGI

a. Answer -

Charitable contribution deduction	$33000
Carryover	$0

Explanation:

All the contributions are deductible except the donation to the needy family. This donation will not qualify for a charitable deduction because the family is not a qualified charity.

The IBM stock is capital gain property, so Calvin can deduct the FMV of the stock ($22000) subject to a 30% of AGI ($100000 * 30% = $30000) ceiling.

The painting is not capital gain property because it has not appreciated in value. Hence, Calvin can only deduct the value of the painting subject to the 50% of AGI ceiling ($100000 * 50% = $50000).

Calvin’s cumulative donations are $33000 ($22000 + $3000 + $8000), which does not approach the 50% limit.

b. Answer -

Charitable contribution deduction	$33000
Carryover	$0

Explanation:

Because the painting is not capital gain property.

Calvin’s cumulative donations are $33000 ($22000 + $3000 + $8000), which does not approach the 50% limit.

Similar to above explanation.

c. Answer -

Charitable contribution deduction	$25000
Carryover	$8000

Explanation:

The IBM stock is capital gain property and the painting is not capital gain property.

Hence, Calvin can only deduct the value of the stock subject to the lesser of

(1) The value of the stock up to the 30% AGI limit ($50000 * 30% = $15000) or

(2) The remaining amount of deduction to reach the 50% limit. ($25000 - $11000 = $14000)

Hence, Calvin can deduct $25000 this year consisting of cash of $8000, painting of $3000, and the stock of $14000.

The remaining value of the stock $8000 ($22000 - $14000) is carried over to next year subject to the 30% of AGI limit.

d. Answer -

Charitable contribution deduction	$31000
Carryover	$2000

Explanation:

The IBM stock is capital gain property but because the Donee is a private non-operating foundation, the deduction for the value of the stock is subject to a 20% of AGI limitation.

Hence, Calvin can deduct the lesser of

(1) The value of the stock up to the 20% AGI limit ($20000) or

(2) The remaining amount of deduction to reach the 50% limit ($50000 - $3000 - $8000 = $39000)

Hence, Calvin can deduct $31,000 this year consisting of cash of $8,000, painting of $3,000, and the stock of $20000.

The remaining value of the stock $2000 ($22000 - $20000) is carried over to next year subject to the 20% of AGI limit.

e. Answer -

Charitable contribution deduction	$38000
Carryover	$2000

Explanation:

FMV changes to $10000 property type also change to capital gain property.

So,

The IBM stock is capital gain property and the painting is also capital gain property.

Hence, Calvin can only deduct the value of the stock subject to the lesser of

(1) The value of the stock up to the 30% AGI limit ($100000 * 30% = $30000) or

(2) The remaining amount of deduction to reach the 50% limit. ($50000 - $8000 = $42000)

Hence, Calvin can deduct $38000 this year consisting of cash of $8000, painting and the stock of $30000.

The remaining value of the stock $2000 [($22000 + $10000) - $30000] is carried over to next year subject to the 30% of AGI limit.