CPA · Question 03 · Area I: Individual Compliance and Planning
A taxpayer wants to donate stock held for 5 years to a public charity. The stock has an adjusted basis of $20,000 and a fair market value (FMV) of $50,000. The taxpayer's AGI is $100,000. The taxpayer wants to maximize their current year charitable deduction. Which strategy yields the highest deductible amount for the current year, assuming the relevant percentage limitations are 30% of AGI for FMV contributions of capital gain property and 50% of AGI for basis contributions?
Answer options:
Sell the stock and donate the cash proceeds.
Donate the stock directly and deduct FMV subject to the 30% AGI limit.
Donate the stock directly and elect to reduce the deduction to basis to use the 50% AGI limit.
Donate the stock directly; the deduction is limited to basis ($20,000) automatically.
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