Ramon had AGI of $180,000 in 2017. He is considering making a charitable contrib
ID: 2561794 • Letter: R
Question
Ramon had AGI of $180,000 in 2017. He is considering making a charitable contribution this year to the American Heart Association, a qualified charitable organization. Determine the current allowable charitable contribution deduction in each of the following independent situations, and indicate the treatment for any amount that is not deductible currently. Ramon has decided to make his $95,000 gift to the American Heart Association in the form of cash. However, he is considering delaying his gift until next year when his AGI will increase to $300,000 and he will be in the 33% income tax bracket, an increase from his current-year income tax bracket of 28%. Assume a 6% discount rate. The present value factors, at a 6% discount rate, are as follows:
Year PV Factor at 6%
(year 1) 0.9434
(year 3) 0.8396
(year 5) 0.7473
If required, round your final answers to the nearest dollar. Ramon asks you to determine the tax savings from the tax deduction in present value terms if he were to make the gift this year, rather than delaying the gift until next year. For purposes of this analysis, ignore the potential impact of the overall limitation on certain itemized deductions.
Total present value of tax savings from the tax deduction if made this year: $
Total present value of tax savings from the tax deduction if made next year: $
Explanation / Answer
Assuming that the Amercian Heart Association Qualifies for 50% deduction of adjusted gross income, the savings for donation are as under
Assuming that the Amercian Heart Association Qualifies for 50% deduction of adjusted gross income, the savings for donation are as under
Current year Amount Next year Amount Tax in case of no donation Tax in case of no donation AGI $180,000 AGI $300,000 Tax (28%*180,000)) $50,400 Tax (33%*300,000) $99,000 PV of Tax (99,000*1) $99,000 PV of Tax (99,000*.9434) $93,397 Tax in case of donation Tax in case of donation AGI $180,000 AGI $300,000 Donation $95,000 Donation $95,000 Donation limitation (50% of AGI) $90,000 Donation limitation (50% of AGI) $95,000 Taxable income (180,000-90,000) $90,000 Taxable Income (300,000-95,000) $205,000 Tax (28%*90000) $25,200 Tax (33% * 205,000) $67,650 PV of Tax (25,200*1) $25,200 PV of Tax (67,650*0.9434) $63,821 PV of Tax Savings (50,400-25,200) $25,200 PV of Tax Saving (93,397-63,821) $29,576Related Questions
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