Question

Simone donated a landscape painting (tangible capital gain property) to a library, a public charity. She purchased the painting five years ago for $50,000, and on the date of the gift, it had a fair market value of $200,000. What is her maximum charitable contribution deduction for the year if her AGI is $300,000 (before considering the itemized deduction phase-out)?

A. $100,000.

B. $200,000.

C. $90,000 if the library uses the painting for its charitable purpose.

D. $150,000.

E. None of these.

Answer 1

Simone's maximum charitable contribution deduction for the donation of a painting to a public charity is limited to 30% of her AGI. As her AGI is $300,000, the maximum deduction she can claim is $90,000.

Step-by-step explanation:

The question focuses on determining the maximum charitable contribution deduction that Simone can claim for donating a landscape painting to a charity. Under the tax laws applicable to such donations, a taxpayer can usually deduct the fair market value of the donated property if it is capital gain property and if it is put to a related use by the charity. However, this deduction is subject to limitations based on the taxpayer's adjusted gross income (AGI).

For contributions of capital gain property to public charities, a taxpayer can deduct up to 30% of their AGI for that tax year. In Simone's case, her AGI is $300,000. Therefore, 30% of Simone's AGI would be $90,000 ($300,000 x 30% = $90,000). Since the library is using the painting for its charitable purpose, which aligns with the conditions for claiming the fair market value, Simone's maximum charitable contribution deduction for the year is $90,000 (Option C).