ExpertHard1 markMultiple Choice
CPA · Question 52 · Area IV: Individual Taxation
A taxpayer contributes property with a basis of $10,000 and a fair market value of $15,000 to a qualified charitable organization. The property is tangible personal property that the charity puts to an 'unrelated use' (sells immediately). What is the deductible amount?
A taxpayer contributes property with a basis of $10,000 and a fair market value of $15,000 to a qualified charitable organization. The property is tangible personal property that the charity puts to an 'unrelated use' (sells immediately). What is the deductible amount?
Answer options:
A.
$10,000
B.
$15,000
C.
$12,500
D.
$0
How to approach this question
Charitable Contribution of Tangible Personal Property: If Related Use (e.g., painting to museum) -> FMV. If Unrelated Use (e.g., painting to Red Cross who sells it) -> Lesser of Basis or FMV.
Full Answer
A.$10,000✓ Correct
A
For contributions of tangible personal property, if the property is put to an unrelated use by the donee (like being sold), the deduction is limited to the lesser of the adjusted basis or the FMV. Here, Basis ($10,000) < FMV ($15,000).
Common mistakes
Assuming FMV applies to all property contributions.
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