During the year, Ricardo made the following contributions to aqualified public c
ID: 2771004 • Letter: D
Question
During the year, Ricardo made the following contributions to aqualified public charity:
Cash $110,000
Stock in Seagull, Inc. (a publicly tradedcorporation) 140,000
Ricardo acquired the stock in Seagull, Inc as an investment sixyears ago at a cost of $60,000. Ricardo’s AGI is$420,000.
a. What is Ricardo’s charitablecontribution deduction (before application of the overalllimitation on certain itemized deductions)?
b. How are excess amounts, if any,treated?
Explanation / Answer
But, if the sale of the stock on the day of the contributionwould result in a long-term capital gain (meaning that youheld the shares for more than one year), you can generally deductthe full fair market value of the donated shares. : However, in certain situations, you must reduce the fairmarket value by any amount that would have been long-term capitalgain if you had sold the property for its fair market value.Generally, this means reducing the fair market value to theproperty's cost or other basis. You must do this if: : You choose the 50% limit instead of the special 30% limit for capital gainproperty, : The special 30% limit also appliesto these gifts if they are gifts of capital gain property for whichyou figure your deduction using fair market value without reduction forappreciation.: One can carry-over (but not back) anyexcess contribution for fiveyears : so our AGI in this case is 420000 : 50% overall limit of 420000=210000 30% limit(capital gains) of 420000=126000 :
lets first apply the 30% rule to our stock :
since we can write off the full amount of 140000 we will have carryover of at least 14000...... :
the reason we could have more is because the total of allcontributions we can deduct is limited to 210000 : 210000-100000 =110000 is the amount remaining we can applytoward a deduction this year : since our total deduction from stock is140000.....subtract the remaining deduction to see how much of thiswe can apply this year. : 140000-110000=30000 ......which isthe amount we will carry over for the next 5 years : charitable contribution for this year is100000+110000= $210000 excess amount to be carried over for the next 5 years is$30000 : so our AGI in this case is 420000 : 50% overall limit of 420000=210000 30% limit(capital gains) of 420000=126000 :
lets first apply the 30% rule to our stock :
since we can write off the full amount of 140000 we will have carryover of at least 14000...... :
the reason we could have more is because the total of allcontributions we can deduct is limited to 210000 : 210000-100000 =110000 is the amount remaining we can applytoward a deduction this year : since our total deduction from stock is140000.....subtract the remaining deduction to see how much of thiswe can apply this year. : 140000-110000=30000 ......which isthe amount we will carry over for the next 5 years : charitable contribution for this year is100000+110000= $210000 excess amount to be carried over for the next 5 years is$30000
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