In addition to cash contributions to charity, Dean decided to donate shares of stock and a portrait painted during the earlier p
art 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 $15,000 $15,000
Red Cross Cash 14,500 14,500
State History Museum Painting 5,000 82,000
City Medical Center Dell stock 28,000 17,000
a. Determine the maximum amount of charitable deduction for each of these contributions ignoring the AGI ceiling on charitable contributions.
b. Assume that Dean’s AGI this year is $150,000. Determine Dean’s itemized deduction for his charitable contributions this year and any carryover.
c. Assume that Dean’s AGI this year is $240,000. Determine Dean’s itemized deduction for his charitable contributions this year and any carryover.
d. Suppose Dean is a dealer in antique paintings and had held the painting for sale before the contribution. What is Dean's charitable contribution deduction for the antique painting in this situation (ignoring AGI limitations)?
e. Suppose that Dean’s objective with the donation to the museum was to finance expansion of the historical collection. Hence, Dean was not surprised when the museum announced the sale of the portrait because of its limited historical value. What is Dean's charitable contribution deduction for the paintings in this situation (ignoring AGI limitations)?
Charity Property Cost FMV
State University Cash $15,000 $15,000
Red Cross Cash 14,500 14,500
State History Museum Painting 5,000 82,000
City Medical Center Dell stock 28,000 17,000
a. Determine the maximum amount of charitable deduction for each of these contributions ignoring the AGI ceiling on charitable contributions.
b. Assume that Dean’s AGI this year is $150,000. Determine Dean’s itemized deduction for his charitable contributions this year and any carryover.
c. Assume that Dean’s AGI this year is $240,000. Determine Dean’s itemized deduction for his charitable contributions this year and any carryover.
d. Suppose Dean is a dealer in antique paintings and had held the painting for sale before the contribution. What is Dean's charitable contribution deduction for the antique painting in this situation (ignoring AGI limitations)?
e. Suppose that Dean’s objective with the donation to the museum was to finance expansion of the historical collection. Hence, Dean was not surprised when the museum announced the sale of the portrait because of its limited historical value. What is Dean's charitable contribution deduction for the paintings in this situation (ignoring AGI limitations)?
1 answer:
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Answer: $80 million per year for 25 years
Explanation:
The option you should choose is one that will guarantee you the highest present value.
This means that you need to discount the annual payment of $80 million per year for 25 years to find the present value. As you did not include a rate, we shall assume a rate of 8% for reference purposes.
The annual payment is an annuity so the present value can be calculated by:
Present value of annuity = Annuity payment * Present value interest factor, rate, no. of years
= 80,000,000 * Present value interest factor, 8%, 25 years
= 80,000,000 * 10.6748
= $853,984,000
<em>The present value of the annual payment is more than the present value of the $850 million received today so the Annual payment should be taken. </em>
