Amy makes a transfer of a painting worth $100,000 to her favorite charity. She paid $40,000 for the painting 10 years ago. Which of the following statements is most correct about that transfer? The first $15,000 of that gift is not taxed because it qualifies for the annual exclusion and the remaining $85,000 is not taxed because it is less than the equivalent exemption. The first $15,000 of that gift is not taxed because it qualifies for the annual exclusion and the remaining $85,000 is not taxed because it is less than the unified credit. The first $15,000 of that gift is not taxed because it qualifies for the annual exclusion and the remaining $85,000 is not taxed because it qualifies for a deduction as a charitable contribution. The full amount of the gift is not taxed because it is a charitable contribution. Amy gets to take a charitable contribution deduction only for the portion of the painting's value which exceeds her $40,000 basis in the property.

Answered: Amy makes a transfer of a painting…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Amy makes a transfer of a painting worth $100,000 to her favorite charity. She paid $40,000 for the painting 10 years ago. Which of the following statements is most correct about that transfer?

		The first $15,000 of that gift is not taxed because it qualifies for the annual exclusion and the remaining $85,000 is not taxed because it is less than the equivalent exemption.
		The first $15,000 of that gift is not taxed because it qualifies for the annual exclusion and the remaining $85,000 is not taxed because it is less than the unified credit.
		The first $15,000 of that gift is not taxed because it qualifies for the annual exclusion and the remaining $85,000 is not taxed because it qualifies for a deduction as a charitable contribution.
		The full amount of the gift is not taxed because it is a charitable contribution.
		Amy gets to take a charitable contribution deduction only for the portion of the painting's value which exceeds her $40,000 basis in the property.

Expert Solution

Step 1

Deduction-

Deduction refers to the amount that is permissible by the department of income tax and is reduced from the taxpayer's adjusted gross income to arrive at taxable income. The deduction would be computed on the basis of the rules provided by the authorized authority.

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