Charitable Contributions and Deductions

Question 1

Public charities - 50% organizations

Answer 1

• churches
• schools
• hospitals
• all organizations for charitable, religious, educational, or literary purposes or for prevention of cruelty to children or animals

Question 2

Private charities - 30% organizations

Answer 2

• private nonoperating foundations
• fraternal orders
• war veterans organizations

Question 3

Deduction limitations

Answer 3

1. calculate the maximum deductible
   - cannot deduct more than 60% AGI for cash gifts to public charity
   - excess is carried forward as itemized deduction for 5 years or death
2. calculate the eligible amounts given to 50% organizations (public)
3. calculate the eligible amounts given to 30% organizations (private)

Question 4

Carryover period

Answer 4

• unused charitable deduction may be carried forward for the next 5 years or until death
• with 5 year carryover and year of contribution, actual window is 6 years
• ceiling percentage remain in force when deduction is carried forward

Question 5

Appreciated long term gain property

Answer 5

• gift of appreciated property
• deduction ceiling for gifts of appreciated long term gain property to 50% orgs is 30% of AGI unless elected to use property’s basis rather than FMV
• is basis is used, can deduct up to 50% AGI
• if use unrelated (no use) limited to basis

Question 6

Types of property - ordinary income

Answer 6

• property that if sold would produce ordinary income, not capital gains
• deduction is limited to basis

Types
- inventory
- copyright
- use-related property (stock and real estate)
- work of art
- STCG

Question 7

Non-itemizers

Answer 7

• cant take charitable deduction if itemizing
• choose greater of standard deduction or itemized

Question 8

Substantiating requirements

Answer 8

• charitable deduction not allowed unless taxpayer can prove it
• any donation over $250 needs to substantiate it by written acknowledgment from donee charity

Question 9

Substantiating vehicle donations

Answer 9

• deduction will be denied if failing to obtain written acknowledgment for any qualified vehicle donation if value exceeds $500
• if donee org sells vehicle without enhancements, deduction allowed is gross proceeds received by charity from sale

Question 10

Contribution of inventory

Answer 10

• corporation may not deduct more than 10% of its taxable income for charitable gifts
• if a corp (other than S) makes gift of inventory it can deduct its basis for the property plus 1/2 property unrealized appreciation
• claimed deduction may not exceed twice the basis
• inventory must be for ill, needy, or care of infants