Unit 11

Question 1

Public Charities (501(c)(3) Organizations)

Answer 1

-Designation: 50% organizations under IRC Section 501.
-Purpose: Benefit the public good.
-Examples: Schools, Religious organizations, Hospitals
Well-known charities (Red Cross, United Way, American Cancer Society, Goodwill, Salvation Army, etc.)
-Donations: Allowed to all levels of government.

Question 2

Private Charities (30% Organizations)

Answer 2

Designation: 30% organizations.

Alternative Names:
Private charity

Private non-operating foundation
Examples:
Fraternal orders
Veterans organizations

Question 3

Charitable Contribution Deduction Limit

Answer 3

Overall 50% of AGI
IF CASH = 60%

Question 4

Ordinary Income for Charitable Contributions

Answer 4

Cash
Inventory
Stock-in-trade
Short-term capital gain/loss property

Question 5

Charity: Ordinary Income, Lesser of FMV or Basis, 50% org

Answer 5

Question 6

Charity: Ordinary Income, Lesser of FMV or Basis, 30% org

Answer 6

Lesser of 30% AGI, or 50% AGI minus the 50% organization contributions.

Question 7

Charity: Long Term Cap Gain, Intangibles, Real Estate and Use-Related Personal Property, 50% org

Answer 7

Can elect to deduct up to 50% AGI, basis is used rather than FMV. Election waives the 5-year carry forward.

Question 8

Charity: Long Term Cap Gain, Intangibles, Real Estate and Use-Related Personal Property, lesser of FMV or Basis 30% org

Answer 8

An exception is made in the tax code for appreciated stock contributed to a 30% organization, which is allowed a valuation of its FMV.

Question 9

Charity: Long Term Cap Gain, Non Use-Related Tangible Personal Property, Basis, 50% org

Answer 9

Question 10

Charity: Long Term Cap Gain, Non Use-Related Tangible Personal Property, 30% org

Answer 10

Question 11

Charity: Long Term Cap Gain, Indirect Gifts (Services), cost of services

Answer 11

Question 12

Charitable Contribution Carryover

Answer 12

-Excess Contributions: Value exceeding 50% of AGI (except 50% basis election property).
-Carryover Period: Up to 5 years.
-Exception: 50% basis election property does not follow these rules.

Question 13

Appreciated Property: Charitable Donations

Answer 13

-Tax Benefit: Reduces both regular tax and AMT liability.
-Effective Strategy: Donate long-term capital gain property (including Section 1231 assets).
-Valuation: Full Fair Market Value (FMV) is deductible (subject to AGI limits).
-Key Advantage: Appreciation is NOT recognized as income for regular tax OR AMT purposes.

Question 14

Non-Deductible Charitable Contributions

Answer 14

Volunteer Time: No deduction for your time.
Property Use: No deduction for the rental value of property donated for use.
Blood Donations: Non-deductible.
Childcare Costs (Charity-Related): Not deductible.
Split-Dollar Life Insurance: Non-deductible if the charity directly or indirectly pays premiums.

Question 15

Appraisals for Charitable Contributions

Answer 15

Required when: Donating property (except cash and publicly traded securities) valued over:
$5,000 (general property)
$10,000 (non-publicly traded securities)
Attachment: Qualified appraisal must be attached to your tax return.

Question 16

Substantiation Requirements: Charitable Donations

Answer 16

Value under $250: No special documentation needed (canceled check is sufficient).
Value $250 or greater: Written acknowledgment from the charity is required.

Question 17

Pass-Through Entities (S-Corp, Partnership, LLC) Charitable Contribution

Answer 17

-Reported on Schedule K-1.
-Passed through to individual taxpayer’s return.

Question 18

C Corp Charitable Contribution

Answer 18

-Deduction limit: 10% of net income.
-Net income is calculated after adding back these deductions:
Net Operating Loss (NOL)
Capital Loss Carrybacks/Carryforwards
Dividend Received Deductions