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?

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

Answer 1

Markita can only deduct $1,000 for her stock donation to a qualified charitable organization because it is considered ordinary income property, not capital gain property, due to the holding period being less than a year.

Step-by-step explanation:

Regarding Markita's donation of stock to a qualified charitable organization, the correct statement is that the stock is considered ordinary income property. Since she held the stock for less than a year, it is not treated as capital gain property. Therefore, the accurate deduction is the basis in the stock, which is $1,000, not the fair market value. This is because for ordinary income property, you can only deduct your basis in the property, not the fair market value. So the correct answer is c. The stock is ordinary income property. She will deduct $1,000, since her basis is less than fair market value.