[CPAchronicles]

Hi all,

came across a weird question – is there any event where a charitable contribution will result in a capital gain or loss? (when the FMV differs)

[How many letters do you need]

Not that I can think of. You don't claim a gain/loss when donating property it's either basis if short term or FMV if long term up to 30% AGI..

MBA,CMA,CPA, CFF?, ABV?

[Anonymous]

For the current tax year, Tom and Karen, married taxpayers filing a joint tax return, qualified to itemize deductions. Their adjusted gross income was $90,000. Karen gave $1,000 for Christmas gifts directly to a needy family identified by her co-workers. Tom had $1,500 withheld from his payroll checks throughout the year to benefit the Children's Make-a-Wish Foundation. In addition, Tom and Karen donated to their church a piece of artwork valued at $2,000 that they purchased for $500 when they were married 10 years ago. There were no other contributions made throughout the year. Considering only to the information contained here, on their current year income tax return, Tom and Karen will claim:

– A charitable deduction of $3,500 and a capital gain of $1,500.

– A charitable deduction of $4,500 and a capital gain of $0.

-A charitable deduction of $3,000 and a capital gain of $1,500.

– A charitable deduction of $3,500 and a capital gain of $0.

[Anonymous]

Choice “4” is correct. Considering only to the information contained here, on their current year income tax return, Tom and Karen will claim a charitable deduction of $3,500 [$1,500 from Tom's payroll deductions plus $2,000 for the painting] and capital gain of $0. Because the painting [a capital asset] was held over one year before being contributed, it qualified to be deducted at the higher FMV without capital gains being recognized on the difference between the FMV and tax basis. Although the 30% rule applies to such contributions, this case is below the threshold (i.e., 30% of $90,000 AGI equals $27,000, which would be the upper limit for deducting at the higher FMV). Deductions made directly to needy families that are not listed by the IRS as qualified organizations are not allowable itemized deductions and would be deemed a gift (and follow the gift tax rules).

[CPAchronicles]

thanks!!

[Author]

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