A taxpayer donates a painting to a public charity (museum). The painting was purchased 5 years ago for $10,000 and has an FMV of $50,000. The museum puts the painting in storage and sells it 6 months later (unrelated use). What is the taxpayer's charitable contribution deduction amount?

Answer options:

$50,000

$10,000

$30,000

How to approach this question

Tangible Personal Property Rule: Related Use (displayed in museum) -> FMV. Unrelated Use (sold/stored) -> Basis.

Full Answer

B.$10,000✓ Correct

IRC §170(e)(1)(B). If tangible personal property is contributed to a charity and put to an unrelated use, the deduction is reduced by the long-term capital gain amount (i.e., limited to basis).

Common mistakes

Assuming FMV deduction applies to all capital gain property.

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