Charitable Contribution

Question 1

Bond Interest
Eg:
U.S. Treasury bond interest

State of Georgia bond interest

Answer 1

Interest on municipal bonds (bonds issued by state or local governments) is excluded from gross income. Therefore, the city of Atlanta and State of Georgia bond interest is not taxable. The U.S. Treasury and Row Corporation bond interest is taxable. The Ellis Company stock dividend is also taxable.

Although interest on municipal bonds (bonds issued by state or local governments) is excluded from gross income, income from interest on U.S. Treasury bonds and interest and dividends from corporations are included in taxable income.

Question 1

Jeffrey, a single taxpayer, had $55,000 in adjusted gross income for the current year. During the current year he contributed $19,500 to his church. He had a $5,000 charitable contribution carryover from his prior year church contribution. What was the maximum amount of properly substantiated charitable contributions that Jeffrey could report as an itemized deduction for the current year?

Answer 1

24,500
The deduction for cash contributions to a public charity, such as a church, is limited to 60 percent of AGI. Jeffrey’s AGI limit for the current year would be $55,000 × 60% = $33,000. The current year contributions of $19,500 plus the charitable contributions carryover from the previous year of $5,000 = $24,500. The total of $24,500 is less than the $33,000 AGI limit, so the deduction is not limited.

Question 2

Charitable Contribution:

Answer 2

1- Property donated (land) 30% of AGI (If held for 1 year or less than 1 year the amount of deduction is the lesser of the property adjusted or FMV)
2- Cash contribution deduct up to 60% of AGI (church)
3- Ordinary Income property contribution (short term gain or ordinary Income of sold
a) 50 % AGI limitation
b) Deduction is limited to lesser of - Taxpayer cost basis in the property or
- Fair market value

NB: When a Taxpayer has multiple different types of donations, you apply the limitations in this order:
a) Cash donation 60% limit
b) Ordinary Income property 50% limit and
c) LTCG (Long Term Capital Gain) property 30% limit.

When purchasing tickets to a charity event, the deductible portion is the amount exceeding the FMV of the benefits received.