Question

In addition to cash contributions to charity, Dean decided to donate shares of stock and a portrait painted during the earlier part of the last century. Dean purchased the stock and the portrait many years ago as investments. Dean reported the following recipients:

Charity Property Cost FMV
State University Cash $ 17,400 $ 17,400
Red Cross Cash 15,700 15,700
State History Museum Antique painting 5,240 91,600
City Medical Center Dell stock 52,000 41,000






b. Assume that Dean's AGI this year is $270,000. Determine Dean's itemized deduction for his charitable contributions this year and any carryover.

Answer 1

Dean's itemized deduction for charitable contributions this year is $72,880, consisting of deductions for cash donations, stock donations, and a donation of an antique painting.

Step-by-step explanation:

To determine Dean's itemized deduction for charitable contributions, we need to consider the limitations set by the IRS. The deduction for charitable contributions is limited to a certain percentage of the taxpayer's adjusted gross income (AGI). In Dean's case, his AGI is $270,000. Cash contributions to charities are generally deductible up to 60% of AGI. Therefore, Dean can deduct $33,100 ($17,400 + $15,700) for the cash donations to State University and Red Cross.

However, the donation of stock and the antique painting are subject to different limitations. For stock donations, the deduction is limited to 30% of AGI. Dean donated Dell stock with a cost of $52,000 and a fair market value (FMV) of $41,000. Therefore, Dean can deduct $12,300 ($41,000 FMV) for the Dell stock donation.

The donation of the antique painting to the State History Museum is considered a donation of a capital asset. If the FMV of the painting is greater than its cost, Dean can deduct up to 30% of AGI. In this case, the FMV of the painting is $91,600, which exceeds its cost of $5,240. Therefore, Dean can deduct $27,480 for the donation of the antique painting.

Adding up all the deductions, Dean's total itemized deduction for charitable contributions this year is $72,880 ($33,100 + $12,300 + $27,480). However, if the total exceeds 60% of AGI, the excess can be carried forward and deducted in future years.