Unit 3 Charitable/Philanthropic Contributions and Deductions

Question 1

Charitable contributions are allowed if…

Answer 1

Donor itemizes deductions

Has proper substantiation of contributions kept

Allowed in year paid or accrued from years past if consisting of property or cash

Question 2

Is Volunteering your services an allowable deductions?

Answer 2

No, but related personal expenses are

Question 3

What are the 3 questions you should ask about a charitable contribution and what will they help determine?

Answer 3

1. Type of Charity (public or private)
2. Type of Property Contributed
3. How will or does the charity use the property

They help determine

1. Annual percentage limitations of contribution
2. Maximum (or carryover) deduction that is allowable

Question 4

What are the 2 types of Charitable organizations?

Answer 4

1. Public Charities (50% of AGI)

2. Private Charities or foundations (30% of AGI)

Question 5

Deductions are not to exceed 50% of AGI for Public Charities and 30% for private…except for?

Answer 5

Cash to a Public charity can be up to 60% of AGI

Question 6

For amount of charitable deductions that are over the AGI limits what are the carryover to later tax years rules?

Answer 6

You can carry over for 5 years.

Question 7

What are your deduction limits if you donate cash to a charity?

Answer 7

60% of AGI for Public Charity

30% of AGI for Private Charity

Question 8

What are the Deduction limits for Appreciated property?

Answer 8

You have two choices you can elect to donate the property at FMV or your tax basis.

FMV: Public Charity 30% of AGI, Private Charity 20% AGI

Basis: Public Charity 50% of AGI, Private is 20% AGI

Question 9

What are the deduction rules for a depreciated property or one that shows a loss?

Answer 9

the donor can only deduct the current value of the property.

In such a situation it would be better for the donor to sell the property take the loss deduction and then donate the cash to the charity.

Question 10

What are Nondeductible contributions or property?

Answer 10

To Foreign organizations, Individuals, Political groups, candidates, political campaigns, or political parties, cost of raffle, bingo, lottery tickets, Tuition, value of a persons time.

Question 11

What is a Bargain Sale to a Charity?

Answer 11

Donor transfers property to a charity in exchange for a sum that is LESS than FMV.

The Transaction is considered part sale part donation and donor MUST recognize capital gain.

Question 12

Bargain Sale to a Charity

How do you calculate the capital gain to the donor is and what the donor can include as a donation to the charity?

Answer 12

1st: Must determine the allocated basis in the property

Basis x (sales price / FMV) = Allocated Basis

2nd: Determine taxable gain to donor.

Sales Price - allocated basis = taxable gain

3rd: Determine the donation or gift to charity.

FMV - Sales Price to the charity = FMV

Original basis - allocated basis = basis of donation to charity

Now the donor can chose to use the FMV or the basis in his deduction.

Question 13

What are the donation deductions to a charity for use related property and use-unrelated property?

Answer 13

1. use - unrelated

Limited to lessor of: FMV of property or tax basis.

Public: Limited to 50% of AGI
Private: Limited to 20% of AGI

2. use related

Donor has 2 choices.

A. FMV deduction: Public 30% of AGI and Private 20% of AGI

B. Deduct at Basis: Public 50% of AGI and Private 20% of AGI

Question 14

What is the deduction limits to a charity for?

Ordinary income property and short-term capital gain property?

Answer 14

Lesser of the adjusted basis or FMV

Public: 50% of AGI
Private: 30% of AGI

Question 15

What is the deduction limits to a charity for?

Intangibles

Answer 15

Either of 2 choices

1. FMV: Public 30% of AGI, Private 20% of AGI
2. Basis election: Public 50% of AGI, Private 20% of AGI

Question 16

What is the deduction limits to a charity for?

Real Property

Answer 16

Either of two choices

1. FMV: Public 30% of AGI, Private 20% of AGI
2. Basis election: Public 50% of AGI, Private 20% of AGI

Question 17

You must have an appraisal done on a donated property unless…and is the appraisal deductible for tax purposes?

Answer 17

Not required up to $5,000.

No the cost of the appraisal is not deductible

Question 18

What must a donor to charity have to substantiate the donation?

Answer 18

Cancelled check, bank record or receipt from the donee.