Question

Lance paid $21,000 for seven acres of land six years ago. During the current year, Lance donated the land to his church. An appraisal of the land determined that the fair market value of the land is $30,000. Which of the following statements is true concerning the donation of land?

a) Lance can deduct $21,000 as the fair market value.
b) Lance can deduct $30,000 as the fair market value.
c) Lance cannot deduct the donation of the land.
d) Lance's deduction is limited to his basis in the land.

Answer 1

Lance's deduction for the donation of land is limited to his basis in the land, which is the original purchase price of $21,000.

Step-by-step explanation:

In the case of Lance donating the land to his church, the fair market value of the land is $30,000. However, Lance originally purchased the land for $21,000 six years ago. When it comes to deducting the donation of land, the correct statement is d) Lance's deduction is limited to his basis in the land.

This means that Lance can only deduct the original purchase price of $21,000 as his basis for the land, not the current fair market value.