Original Fast Forward Academy test bank question:
Jerry's adjusted gross income for the year is $40,000. How much of the following contributions (after limitations, if any) can he deduct on Schedule A?
$1,000 paid at a charity auction for a week at a fishing resort in Arkansas. The trip is valued at $1,000.
$500 to the local Chamber of Commerce.
Land adjacent to his church for use as a parking lot. The fair market value of the land is $35,000. Jerry paid $20,000 for the land. He doesn't elect to reduce the fair market value to qualify for a different AGI limit.
D. $ 8,000
Jerry's AGI is $40,000. The FMV of his gift of capital gain property equals $35,000. If he uses FMV as the value of the gift, his deduction cannot exceed 30% of his AGI, which is $12,000 ($40,000 x 30%). He could elect to value his gift at cost and receive a higher deduction (50% of AGI limit), but he chose not to do that. A special 30% limit applies to gifts of capital gain property to 50% limit organizations. However, the special 30% limit does not apply when using the taxpayer's cost in place of FMV as the amount of the gift. Instead, only the 50% limit applies. In this case, the FMV of Jerry's gift is used, so his deduction is limited to 30% of AGI.
The $1,000 auction prize is not a donation since the value he receives is the same as what he paid. The Chamber of Commerce donation is also not a gift to a charitable organization.
FFA RTRP Book Reference: CH 6 Standard and Itemized Deductions Subsection: Itemized deductions Subject: Charitable contributions (e.g., cash, non-cash, 50% vs 30%, documentation required) Correct Answer: B
The limit for the deduction is 30% of AGI (not of the gift itself)
IRS Circular 230 Disclosure
Pursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.
Start a Tax Career
Tax Course & RTRP Exam Guide + Practice Exams
Learn more about FFA's IRS RTRP study guide and UNLIMITED Practice Exams.