Question

Markita donated stock that she has held for less than a year to a qualified charitable organization. Her basis in the stock is 1,000 and the fair market value of the stock is 1,200. Which one of the following statements is true regarding Markita's donation?

1) The stock is ordinary income property. She will deduct 1,000, since her basis is less than fair market value.
2) The stock is capital gain property. She will deduct 1,200, since capital gain property is allowed to be deducted at fair market value.
3) The stock is ordinary income property. She will deduct 1,200, since a stock donation is valued at fair market value.
4) The stock is capital gain property. She will deduct 1,000, since her basis is less than fair market value.

Answer 1

Markita can deduct $1,000 for the stock donation, which is considered ordinary income property, as it's held for less than a year and the deduction is limited to her cost basis, not the fair market value.

Step-by-step explanation:

When considering the tax implications of donating stock, it is important to determine whether the stock is considered ordinary income property or capital gain property. For stock held for less than a year, it would be considered ordinary income property. This means that the deduction is limited to the cost basis of the stock rather than the fair market value. Therefore, if Markita donates stock she has held for less than a year with a basis of $1,000 and a fair market value of $1,200, she will be able to deduct $1,000 from her taxes, which represents her cost basis in the stock. As a result, the correct statement regarding Markita's donation is that the stock is ordinary income property, and she will deduct $1,000 since her basis is less than the fair market value.