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tn1979
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Joined: 30 Dec 2010
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Posts: 4
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| Posted: 04 Jan 2011 at 23:10 | IP Logged
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Spencer, who itemizes deductions, had adjusted gross
income of $60,000 in 20X1. The following additional
information is available for 20X1:
Cash contribution to church $4,000
Purchase of art object at church bazaar
(with a fair market value of $800 on the date of
purchase) 1,200
Donation of used clothing to Salvation Army
(fair value evidenced by receipt received) 600
What is the maximum amount Spencer can claim as a
deduction for charitable contributions in 20X1?
a. $5,400
b. $5,200
c. $5,000
d. $4,400
Answer :c
I don't know why for art object,only excess of 400 is
deductible. Is there any rule about this?
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Holly
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| Posted: 05 Jan 2011 at 08:04 | IP Logged
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They have an art object worth $800, so they only actually gave $400.
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CPA24
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| Posted: 05 Jan 2011 at 17:15 | IP Logged
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Holly is right. Anytime you receive property for a cash contribution, the amount of the deduction (before the 50% AGI limitation) is the amount of the cash contribution less the FMV of the property received. In this problem, $400 is the excess of the contribution less the FMV of the property received.
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vinceP
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| Posted: 28 Feb 2012 at 00:00 | IP Logged
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Giving actually changes a person from the inside. We give to charities because we feel better when we do and because it lifts us and makes us good. When we donate, it is still important to keep a detailed list of your donation in case questions arise or you get audited on the matter. I heard that the Internal Revenue Service knows that taxpayers routinely inflate the value of charitable contributions on their tax returns. As a result, the tax bureau examines these items specifically closely. It is very important to evaluate presents fairly and transparently if a taxpayer wishes to claim the deductions and avoid an audit. The following recommendations may help. Source for this article: Deducting charitable gifts and avoiding an audit
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dng87
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| Posted: 29 Feb 2012 at 01:31 | IP Logged
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Think of it this way:
$800 is the cost of the art, sold by the church (a recognized charity).
You paid $1,200 for it.
Essentially, you gifted $400 to the church ($1,200 - $800).
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Topic: itemized deduction
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