USA TAX LAW 2015 Your client is in the top marginal tax bracket and wants to don
ID: 2445596 • Letter: U
Question
USA TAX LAW 2015
Your client is in the top marginal tax bracket and wants to donate $10,000 to the American Heart Association.The assets he is considering using to make the donation include $10,000 cash,100 shares of Apple stock worth $5,000 that he paid $1,000 for three years ago and inventory in business that he could sell that has a fair market value of $5,000 that he paid $7,000 for. As his tax accountant he has come to you seeking advice on the most tax advantage way to make the donation. What advice would you give him and why?
Explanation / Answer
By donating $10,000 to the American Heart Association as cash client cam save only tax on $10,000 but when he gives donation as shares of Apple stock and Inventory then client will get double benefit;
1. First of tax benefit n $10000 at a marginal tax rate and;
2. Benefit of capital gain tax on shares. If client does not give shares and inventory as donation then he has to pay capital gain tax on the sale of such shares and inventory.
Thus client should donate shares of Apple stock and Inventory not in the form of cash.
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