An individual donates artwork to San Francisco General Hospital. This was the on

Question

An individual donates artwork to San Francisco General Hospital. This was the only charitable contribution the taxpayer makes during the year. The artwork was purchased several years ago for $50,000; it is worth $140,000 at the time of the donation. The taxpayer's AGI is $160,000. Which of the following could be an accurate statement regarding the taxpayer's charitable deduction for the artwork?

The taxpayer deducts $80,000 in the current year and carries over $60,000 to the next year.

The taxpayer deducts $48,000 in the current year and carries over $2,000 to the next year.

The taxpayer deducts $48,000 in the current year and carries over $92,000 to the next year.

The taxpayer deducts $50,000 in the current year and carries over $0 to the next year.

None of the above statements could be accurate with respect to the taxpayer's charitable contribution deduction.

Explanation / Answer

The original purchase price of artwork is $50,000.

Fair market value of artwork is $140,000.

In case of assesing deduction with respect to charitable donations in terms of property, original purchase price is taken into account instead of fair market value.

So, $50,000 would be taken as amount of charitable donation.

The tax payer can deduct contribution of an amount upto 50% of his adjusted gross income, AGI.

The AGI of given taxpayer is $160,000.

So, he can deduct charitable donatiosn upto $80,000 from his AGI in current year. If his charitable donations would have been more than $80,000 then in that case amount over and above $80,000 can be carried forward to next year.

However, as value of his donation is $50,000. So, he will deduct all of $50,000 in current year and will carry over $0 to the next year.

Thus, correct statement is that the taxpayer deducts $50,000 in the current year and carries over $0 to the next year.

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