Federal Income Tax Charitable Contributions. 2 Itemized Deductions Medical Taxes Interest Charitable...

Federal Income Tax

Charitable Contributions

2

Itemized Deductions

• Medical

• Taxes• Interest• Charitable

Contributions• Casualty Losses• Other

3


A. Alice has AGI of $22,000. During the year she made the following cash contributions:Girl Scouts $3,000Local Church 6,300Oral Roberts University 3,000Tulsa University 300University of Texas 300University of Oklahoma 300

$13,200

In each of the following independent cases, indicate the amount that may be deducted as charitable contributions.

Limited to 50% of AGI $11,000Excess carried over for 5 years

4


B. Bernard had AGI of $16,500. During the year he made the following cash contributions:Boy Scouts $5,000Democratic Party 2,000Needy family in neighborhood 400American Legion 200London School of Economics(England) 800Local Hospital 1,000

Republican

5

C. Cinde operates a retail furniture store. In July of this year she contributed to the local hospital a number of items of furniture (tables, chairs, and sofas) from her merchandise inventory. These items had cost her $3,800 but had a normal retail value of $7,400. Cinde’s AGI this year was $20,000.


Determining the Contributions DeductionFor Gifts to PUBLIC Charities

Cash?

Yes

Deductible up to 50% of AGI *

No

Capital GainProperty?

Yes

No

Both tangibleand personal?

Is FMV <Adjusted Basis?

Yes

Deduct FMV up to 50% of AGI *

Deduct Adjusted Basisup to 50% of AGI *

No

Yes

Used inexempt

function?

No

No Deduct FMVup to 30% of AGI *

Deduct Adjusted Basis up to 50% of AGI *

Yes

ChooseOne:

* Excess amounts may be carried forward for 5 years

Copyright © 2000 by M. Ray Gregg. All rights reserved.

YesDeduct FMV

up to 30% of AGI *


NoIs FMV <

Adjusted Basis?

Cash?Generally…

•Personal use

•Held > 1 yearIs FMV <Adjusted Basis?

Deduct Adjusted Basis

Up to 50% of AGI

No

No

No

8

C. Cinde operates a retail furniture store. In July of this year she contributed to the local hospital a number of items of furniture (tables, chairs, and sofas) from her merchandise inventory. These items had cost her $3,800 but had a normal retail value of $7,400. Cinde’s AGI this year was $20,000.


Deduct Adjusted Basis

Up to 50% of AGI

9

D. Dewayne purchased five tickets from the Boy Scouts. These tickets were to a local benefit performance of the city symphony, with all proceeds going to the Scouts. Normal cost of


these tickets would have been $10 each, but because they were for a benefit, the cost of $15 each. Dewayne and his family attended the performance, using all five tickets.

5 x ($15 – 10) = $25

10

D. Assume the same facts except Dewayne bought the tickets as a purely charitable gesture with the intent of throwing them away – and he did so.


5 x ($15 – 10) = $25

11

E. Eugene is active in the Boy Scouts. During the past year he served as a scoutmaster. At the end of the year he calculated that he had spent $80 for various scout activities such as fund-raising drives. In ad-


dition, he had driven his automobile an estimated 300 miles in connection with scout work. He also had lost 38 working hours from his job with a loss in pay of $820.

12




13

Automobile Expenses

Business $.565 pg 9 – 11

Moving $.24 pg 9 – 20

Medical $.24 pg 7 – 4

CharitableContribution

$.??

* agreement

14

Automobile Expenses

Business $.565 pg 9 – 11

Moving $.24 pg 9 – 20

Medical $.24 pg 7 – 4

CharitableContribution

$.14 pg 7 – 25 Note: Was $.14 last eight years as well.

15




X $.14

16




X $.14

17

G. Gary owned 1,000 shares of X Corporation stock for which he paid $10,000 in 1962. During the current year he contributed 600 shares of this stock to the First Church of Histown. On the date of the contribution, the shares had a market price of $25 per share. Gary’s AGI this year was $25,000.



Cash?

Yes


No


Yes

No



Yes



No

Yes

Used inexempt

function?

No



Yes

ChooseOne:



YesDeduct FMV

up to 30% of AGI *


NoIs FMV <

Adjusted Basis?

Cash?Generally…

•Personal use

•Held > 1 year


YesNo

19

Tangible?

NoNo


Cash?

Yes


No


Yes

No



Yes



No

Yes

Used inexempt

function?

No



Yes

ChooseOne:



YesDeduct FMV

up to 30% of AGI *


NoIs FMV <

Adjusted Basis?


21

Personal

Personal

= non-business

= non - “real”

vs

22

“Real” Estate

23

“Real” Estate

RealtorReal-a-torRealtor

24

Personal

Personal

= non-business

= non - “real”

vs


Cash?

Yes


No


Yes

No



Yes



No

Yes

Used inexempt

function?

No



Yes

ChooseOne:



YesDeduct FMV

up to 30% of AGI *


NoIs FMV <

Adjusted Basis?


No

26

Choose one:

Deduct Basis

to 30% of AGI *

to 50% of AGI *

Deduct FMV

27

to 30% of AGI *Deduct FMV

Choose one:

Deduct Basisto 50% of AGI *

600 x $25 = $15,000

30% x $25,000 = $7,500


Cash?

Yes


No


Yes

No



Yes



No

Yes

Used inexempt

function?

No



Yes

ChooseOne:



YesDeduct FMV

up to 30% of AGI *


NoIs FMV <

Adjusted Basis?

Excess amounts may beCarried forward for 5 years

29

Choose one:

Deduct Basis

to 30% of AGI *

to 50% of AGI *

Deduct FMV

600 x $10 = $6,000

50% x $25,000 = $12,500

30

600 x $10 = $6,000

to 50% of AGI *

Choose one:

Deduct Basis

to 30% of AGI *Deduct FMV

30% x $25,000 = $7,500

31

Contributions

• Problem 7 - 56


Cash?

Yes


No


Yes

No



Yes



No

Yes

Used inexempt

function?

No



Yes

ChooseOne:



YesDeduct FMV

up to 30% of AGI *


NoIs FMV <

Adjusted Basis?


No

33

Choose one:

Deduct Basis

to 30% of AGI *

to 50% of AGI *

Deduct FMV

Problem 7 - 56

34

Choose one:

Deduct Basis

to 30% of AGI *

to 50% of AGI *

Deduct FMV$50,000

30% x $100,000 = $30,000

Problem 7 - 56

35

Choose one:

Deduct Basis

to 30% of AGI *

to 50% of AGI *

Deduct FMV

$40,000

50% x $100,000 = $50,000

Problem 7 - 56

36

Contributions

• Problem 7 - 56• Problem 7 - 54


Cash?

Yes


No


Yes

No



Yes



No

Yes

Used inexempt

function?

No



Yes

ChooseOne:



YesDeduct FMV

up to 30% of AGI *


NoIs FMV <

Adjusted Basis?


38

Problem 7 - 54a. $40,000 FMV 30% limit


Cash?

Yes


No


Yes

No



Yes



No

Yes

Used inexempt

function?

No



Yes

ChooseOne:



YesDeduct FMV

up to 30% of AGI *


NoIs FMV <

Adjusted Basis?

40

Problem 7 - 54a. $40,000 FMV 30% limitb. $10,000 basis 50% limit


Cash?

Yes


No


Yes

No



Yes



No

Yes

Used inexempt

function?

No



Yes

ChooseOne:



YesDeduct FMV

up to 30% of AGI *


NoIs FMV <

Adjusted Basis?

42

Problem 7 - 54a. $40,000 FMV 30% limitb. $10,000 basis 50% limitc. $100,000 FMV 30% limit


Cash?

Yes


No


Yes

No



Yes



No

Yes

Used inexempt

function?

No



Yes

ChooseOne:



YesDeduct FMV

up to 30% of AGI *


NoIs FMV <

Adjusted Basis?

44

Problem 7 - 54a. $40,000 FMV 30% limitb. $10,000 basis 50% limitc. $100,000 FMV 30% limitd. $50,000 basis 50% limit


Cash?

Yes


No


Yes

No



Yes



No

Yes

Used inexempt

function?

No



Yes

ChooseOne:



YesDeduct FMV

up to 30% of AGI *


NoIs FMV <

Adjusted Basis?

46

Problem 7 - 54a. $40,000 FMV 30% limitb. $10,000 basis 50% limitc. $100,000 FMV 30% limitd. $50,000 basis 50% limite. $500 basis 50% limit

47

Contributions

• Problem 7 – 56 • Problem 7 – 54 • Problem 7 – 61

48

Problem 7 - 61Sales Price 30,000

If sold thencash donated

49

Problem 7 - 61Sales Price 30,000Basis 10,000LT Capital Gain 20,000


50

Problem 7 - 61Sales Price 30,000Basis 10,000LT Capital Gain 20,000x CG tax rate 15%


51

Problem 7 - 61Sales Price 30,000Basis 10,000LT Capital Gain 20,000x CG tax rate 15%Additional Tax 3,000


52


Charitable Contribution 30,000


53


Charitable Contribution 30,000x Marginal Rate 35%


54


Charitable Contribution 30,000x Marginal Rate 35%Tax Savings 10,500


55



Net Tax Savings -7,500


56

Problem 7 - 61If stockdonated


Cash?

Yes


No


Yes

No



Yes



No

Yes

Used inexempt

function?

No



Yes

ChooseOne:



YesDeduct FMV

up to 30% of AGI *


NoIs FMV <

Adjusted Basis?

58

Choose one:

Deduct Basis

to 30% of AGI *

to 50% of AGI *

Deduct FMV$30,000


59


Charitable Contribution 30,000

60


Charitable Contribution 30,000x Marginal Rate 35%

61



62

Tax Savings 10,500

Problem 7 - 61

If sold then cash donated:

If stock donated:

Net Tax Savings 7,500

69

Itemized Deductions

• Medical

• Taxes• Interest• Charitable

Contributions• Casualty Losses• Other

70

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