Question

Richard donates publicly traded Gold Company stock with a basis of $1,000 and a fair market value of $15,000 to the college he attended, which is considered a public charity. Richard has owned the shares for 10 years.
1. How is this contribution treated on Richard's tax return?
2. Assuming his adjusted gross income is at least $50,000, Richard can to deduct $_____on his Schedule A.
3. However, Richard may elect to use the 50 percent AGI limitation and deduct $_______.

Answer 1

Answer:

1. How is this contribution treated on Richard's tax return?

Richard can deduct this donation as a qualified contribution to a charity.

2. Assuming his adjusted gross income is at least $50,000, Richard can deduct $15,000 on his Schedule A.

Qualified contribution deductions of long term capital gains are limited to 30% of AGI, and in this case, Richard can deduct the full amount.

3. However, Richard may elect to use the 50 percent AGI limitation and deduct $1,000.

Richard can elect to deduct only the basis of the stock, but who likes to pay more taxes?