dougefresh
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Joined: 26 Jul 2012
Location: United States
Online Status: Offline
Posts: 20
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| Posted: 26 Jul 2012 at 10:46 | IP Logged
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Sorry, I left something out... for Long Term appreciated
property, it is 30% of the FMV. If it's not long term
property, it's the basis.
3) Long-term appreciated property (held 1yr or more at
FMV) is
limited to the LESSOR of:
a) 30% of AGI <or>
b) The remaining amount to reach 50% after cash
contributions
example 3) Bought stock 2 years ago for $10,000, and now
worth 40,000. You'd normally be able to deduct $40,000
for a charitable deduction, but here you are limited to
30% (LT appreciated property) or $30,000. However, you
could still donate an additional $20,000 in case to reach
a total of $50,000 or 50% of AGI
Solution A: If you only donated the long term property
(let's say no cash for now), it's limited to 30% but you
use the FMV as it's been held for over a year. So with
AGI of $100,000, and the stock purchased two years ago
for $10,000, but it's FMV is now $40,000 when you donate
it... your deduction is limited to $30,000
(30%*$100,000).
Solution B: Same facts as solution A, but now you want
to donate cash in addition to the appreciated stock (held
over 1 year, use FMV of $40,000, but limited to $30,000
([30%]). You still haven't reached your $ limit of
$50,000 (50% charity if ALL cash). So now you can still
donate an additional $20,000 in cash (in addition to the
stock), which will make your total deduction $50,000,
which is the maximum it can ever be.
Now let's say you donate $40,000 cash AND the long term
appreciated property (stock purchased 2 years ago for
$10,000, now worth $40,000). Well the cash is worth
$40,000 as it's cash, and for the property, you are
limited to the LESSOR of 30% of AGI <or> the remaining
amount to reach 50% after cash contributions. So we
already donated $40,000 cash, so the property will only
add $10,000, because that brings us up to our maximum
limit of $50,000.
Any excess contribution is carried forward up to 5 years
in a first in-first out basis, after current year
contributions are deducted. So, in that last example, we
would have an excess of $30,000 in long-term property
that could be deducted in the NEXT year. It was worth
$40K (FMV appreciated LT property) when we donated it
last year, but we only got to "use" $10,000 of it,
because we already donated $40,000 cash.
Coincidentally, we could use the full $30,000 carryover
NEXT year as that is 30% of AGI, and the limit for LT
appreciated property. Note we could still in the NEXT
year donate an additional $20,000 in cash, making the
total donation $50,000, or 50% of AGI, which is the max
limit.
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Topic: R2- Please help me in this question
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