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kakasveta [241]
3 years ago
9

Smith, a single individual, made the following charitable contributions during the current year. Smith’s adjusted gross income i

s $60,000.
Donation to Smith’s church: $5,000
Art work donated to the local art museum
(Smith purchased it for $2,000 four months ago and a local art dealer appraised it for): $3,000
Contribution to a needy family: $1,000
What amount should Smith deduct as a charitable contribution?
a. $7,000
b. $8,000
c. $5,000
d. $9,000
Business
1 answer:
pishuonlain [190]3 years ago
3 0

Answer:

A) $7,000

Explanation:

Smith can deduct the $5,000 he donated to the church he attends. The art work donated to the local museum must be deducted at its basis, which is $2,000. Since he only purchased the painting 4 months before, the price increase will be considered a short term capital gain. Donated short term capital gain property must be deducted at basis.

The $1,000 he donated to the needy family is not deductible, since it wasn't a qualifying organization.

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Answer:

Present value of investment X = $41,225.37

Present value of investment Y = $37,233.50

Explanation:

The present value of the cash flows can be found by discounting the cash flows at the discount rate.

This can be found using a financial calculator

Cash flow each year from year 1 to 9 for investment X = $5,800 

Discount rate = 5%

Present value = $41,225.37

Cash flow each year from year one to year 5 for investment Y = $8,600 

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Present value = $37,233.50

I hope my answer helps you

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