Question 1

A taxpayer donated a painting to a public charity (museum) which displayed it. The taxpayer had owned the painting for 5 years. Cost basis was $10,000; FMV was $50,000. The taxpayer's AGI is $100,000. What is the maximum charitable contribution deduction allowed for the current year?

Accepted Answer

1. Determine value: LTCG property put to related use = FMV ($50k). 2. Determine limit: LTCG property limit is 30% of AGI. 3. Calc: 30% * $100k = $30k. 4. Deduction is lesser of Value ($50k) or Limit ($30k).

Question 2

What mistakes do candidates make on this CPA question?

Accepted Answer

Using the 60% (cash) or 50% (ordinary income property) limits instead of the 30% limit for LTCG property.

A taxpayer donated a painting to a public charity (museum) which displayed it. The taxpayer had owned the painting for 5 years. Cost basis was $10,000; FMV was $50,000. The taxpayer's AGI is $100,000. What is the maximum charitable contribution deduction allowed for the current year?

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