In December of each year, Eleanor Young contributes 10% of her gross income to the United Way (a 50% organization). Eleanor, who is in the 24% marginal tax bracket, is considering the following alternatives for satisfying the contribution. Fair Market Value (1) Cash donation $23,000 (2) Unimproved land held for six years ($3,000 basis) $23,000 (3) Blue Corporation stock held for eight months ($3,000 basis) $23,000 (4) Gold Corporation stock held for two years ($28,000 basis) $23,000 Eleanor has asked you to help her decide which of the potential contributions listed above will be most advantageous tax-wise. Evaluate the four alternatives and complete a letter to Eleanor. Determine the amount of the charitable contribution for each option. Charitable Contribution Cash donation $fill in the blank 1 Unimproved land held for six years ($3,000 basis) $fill in the blank 2 Blue Corporation stock held for eight months ($3,000 basis) $fill in the blank 3 Gold Corporation stock held for two years ($28,000 basis) $fill in the blank 4 Dear Ms. Young:I have evaluated the proposed alternatives for your current year-end contribution to the United Way. I recommend that you sell the Gold Corporation stock and donate the proceeds to the United Way. The four alternatives are discussed below.A donation of cash, the unimproved land, or the Gold stock will result in a $fill in the blank 5fcharitable contribution deduction. Donation of the Blue Corporation stock will result in only a $fill in the blank 6 charitable contribution deduction.A direct contribution of the Gold Corporation stock will be a poor decision from a tax perspective in that the decline in value is not deductible and the amount of the charitable contribution would be $fill in the blank 9. If you sell the Gold stock and give the proceeds to United Way, the donation of the proceeds will result in a $fill in the blank 10 charitable contribution deduction. In addition, sale of the stock will result in a $fill in the blank 11 long-term capital loss. If you have capital gains of $fill in the blank 12 or more this year, you can use the entire loss in computing your current taxable income. If you have no capital gains this year, you can deduct $fill in the blank 13 of the capital loss this year and carry over the remaining $fill in the blank 14 loss to future years.You should make the donation in time for ownership to change hands before the end of the year. Therefore, I recommend that you notify your broker immediately so that there will be no problem in completing the donation on a timely basis.Please let me know if you have any questions or would like to discuss my recommendation and the related analysis. Thank you for consulting our firm on this matter. We look forward to serving you in the future.Sincerely,Nora Oldham, CPAPartner Answer:Step 2 Particulars Charitable Contribution (@10%) Tax Deduction Cash Donation $2,300 There is tax deduction of upto 60% on the adjusted gross taxable income on the donation of cash as stated by the federal tax department in USA. Unimproved Land held for 6 years (basis $3,000) $2,000 There is a tax deduction of upto 50% on the adjusted gross taxable income on donation of land as stated by the federal tax department in USA. Blue Corporation stock held for eight months ($3,000 basis) $2,000 There is a tax deduction of upto 60% on the adjusted gross taxable income on the donation of marketable securities as stated by the federal tax department in USA. Gold Corporation stock held for two years ($28,000 basis) $0 There is no tax leaved on the donation of capital market securities as stated by the federal tax department in the USA. So, according to the above table explanation, the maximum tax deduction which a donor can claim is on the Cash Donation of $2,300. Problem 10-38 (LO. 2, 3, 4, 5, 6, 7) Evan is single and has AGI of $277,300 in 2020. His potential itemized deductions before any limitations for the year total $52,300 and consist of the following: Medical expenses (before the AGI limitation) $29,000 Interest on home mortgage 8,700 State income taxes 9,500 Real estate taxes 3,600 Charitable contributions 2,500 After all necessary adjustments are made, what is the amount of itemized deductions Evan may claim? Do not round intermediate calculations. Round medical deduction and final answer to the nearest dollar. Evan's total itemized deduction is $fill in the blank 1 Answer: Step 2 Evan's total itemized deduction is $36,500. It is computed as follows: Particulars Amount Medical expense (standard deduction for single tax payer) $12,200 Interest on home mortgage $8,700 State income tax $9,500 Real estate taxes $3,600 Charitable contribution $2,500 Total Itemized Deduction $36,500
I sent below two questions separate emails and received the answers yesterday. (Problem 10-36 & Problem 10-38)
However, both answers were wrong. (the system only shows correct or incorrect.)
Would you please review these questions and send me both correct answes?
Problem 10-36 (LO. 6, 8)
In December of each year, Eleanor Young contributes 10% of her gross income to the United Way (a 50% organization). Eleanor, who is in the 24% marginal tax bracket, is considering the following alternatives for satisfying the contribution.
|
Eleanor has asked you to help her decide which of the potential contributions listed above will be most advantageous tax-wise. Evaluate the four alternatives and complete a letter to Eleanor.
Determine the amount of the charitable contribution for each option.
|
Dear Ms. Young:I have evaluated the proposed alternatives for your current year-end contribution to the United Way. I recommend that you sell the Gold Corporation stock and donate the proceeds to the United Way. The four alternatives are discussed below.A donation of cash, the unimproved land, or the Gold stock will result in a $fill in the blank 5fcharitable contribution deduction. Donation of the Blue Corporation stock will result in only a $fill in the blank 6 charitable contribution deduction.A direct contribution of the Gold Corporation stock will be a poor decision from a tax perspective in that the decline in value is not deductible and the amount of the charitable contribution would be $fill in the blank 9. If you sell the Gold stock and give the proceeds to United Way, the donation of the proceeds will result in a $fill in the blank 10 charitable contribution deduction. In addition, sale of the stock will result in a $fill in the blank 11 long-term capital loss. If you have
| Particulars | Charitable Contribution (@10%) | Tax Deduction |
| Cash Donation | $2,300 | There is tax deduction of upto 60% on the adjusted gross taxable income on the donation of cash as stated by the federal tax department in USA. |
| Unimproved Land held for 6 years (basis $3,000) | $2,000 | There is a tax deduction of upto 50% on the adjusted gross taxable income on donation of land as stated by the federal tax department in USA. |
| Blue Corporation stock held for eight months ($3,000 basis) | $2,000 | There is a tax deduction of upto 60% on the adjusted gross taxable income on the donation of marketable securities as stated by the federal tax department in USA. |
| Gold Corporation stock held for two years ($28,000 basis) | $0 | There is no tax leaved on the donation of capital market securities as stated by the federal tax department in the USA. |
So, according to the above table explanation, the maximum tax deduction which a donor can claim is on the Cash Donation of $2,300.
Problem 10-38 (LO. 2, 3, 4, 5, 6, 7)
Evan is single and has AGI of $277,300 in 2020. His potential itemized deductions before any limitations for the year total $52,300 and consist of the following:
|
After all necessary adjustments are made, what is the amount of itemized deductions Evan may claim? Do not round intermediate calculations. Round medical deduction and final answer to the nearest dollar.
Evan's total itemized deduction is $fill in the blank 1
Evan's total itemized deduction is $36,500.
It is computed as follows:
| Particulars | Amount |
| Medical expense (standard deduction for single tax payer) | $12,200 |
| Interest on home mortgage | $8,700 |
| State income tax | $9,500 |
| Real estate taxes | $3,600 |
| Charitable contribution | $2,500 |
| Total Itemized Deduction | $36,500 |
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 2 images
