[Anonymous]

Becker Question:

Jimet, an unmarried taxpayer, qualified to itemize deductions. Jimet’s AGI was $30k and he made $2k in cash donation to a needy family. During the year, Jimet also donated stock, valued at $3k, to his church. Jiimet had purchased the stock 4 mths earlier for $1,500. What was the maximum amount of charitable contribution allowable as an itemized deduction of Jimet’s current year Income Tax Return?

a. $0

b. $1,500

c. $2,000

d. $5000

Answer

‘B’

Deductible amount is lower of stock cost (short term property) $1,500

AGI Limit (30% of 30k) $9,000

Rule: Contributions of LT property are generally deductible at FMV at the date of the gift. Contributions of short term property are gennerally deductible at the lower of cost of FMV.

I am not questioning the answer, I am questioning the explanation. According to the Ninja Notes they state the following:

Long term property is valued at FMV up to 30% of AGI

Short term property is valued at Adjusted Basis up to 50% of AGI

In this problem, the cap isn’t relevant but I want to make sure I am understanding correctly. I tried to find an update on this question on the Becker website but was not successful. If anyone has any guidance, I would really appreciate it.

[Anonymous]

Cap is relevant to the question. He's allowed to deduct upto 30% of AGI. Jimet can deduct upto $9,000 if he contributes property that equals that amount. Becasue this is short term property he can only deduct the adjusted basis of the property which is $1500 (lower of cost or FMV). If it was Long term property then Jimet could deduct $3,000, the fair Market value. . The contibution to the needy family does not qualify. Hope this helps

[Anonymous]

I was questions the Short Term % of AGI. Becker has 30% but Ninja notes have 50%. Mini emailed me after I posted this and assured me it should be 50% and Becker has the wrong %. Thanks for the explanation though!

[Anonymous]

Tell Mini to come back. Miss his posts.

[Anonymous]

Haha…he is stubborn, he isn't going to change the way he posts so he is respecting Jeff by just ducking out. Jeff was put in a bad position and had a hard decision to make and Mini doesn't want to keep putting him in the same position over and over. Maybe after things die down he will pop his head in now and again.

[Anonymous]

Hope he does soon, sometimes we all need that tough love.

[Anonymous]

I'm still confused on the 50% of AGI. I thought 50% was only for Cash contributions and property was 30%. Maybe i'm missing something here.

[Texas27]

Becker does not give the wrong %… If you are using the 2012 version then I think you might be misreading it. Becker says that only on FMV property that the 30% limit applies which they go on to explain the FMV property is long-term capital gain property (held over one year). The passkey also says that the overall limit is 50% which includes cash, general property (STCG which the cost is lower than FMV fall into this category), and long-term appreciated property which is limited to 30%.

If the property you give is valued at its basis then the 50% limit applies… if the contribution of property is allowed to be the FMV then the 30% limit applies.

BEC - Feb 2012: 80
AUD - Feb 2012: 84
FAR - Apr 2012: 78
REG - May 2012: 90

Thanks Becker!

[Anonymous]

I used Becker book as well. I agree with Texas27. To be clear, the long-term and short term (property) rules are used to arrive the amount BEFORE the 30% consideration. someone please correct me if I am wrong.

[Anonymous]

The way I am reading the explanation is they are saying this is short term property because it was held for 4 months. At that point it should be tested against 50% of AGI. They use 30% which is for Long Term Property. The AGI limit therefore should be 50% of 30k which is 15k not 9. It doesn't change your answer since the contribution doesn't reach either.

[Anonymous]

Now I am confused. So, for short term property, the basis (in this case, $1,500) was used to against 50% or 30% of AGI??? I thought it was 50%, but I don't think the Becker mentioned it…

[Texas27]

@CPA-Convertible, in this problem the percentage doesn't matter because 30% or 50% of AGI is still greater than the basis in the short-term capital gain property so the entire basis (not FMV) can be deducted in the current year. Here are some situations that might help clarify this.

Situation 1: Same facts as the problem above except the stock was purchased for $20,000 (4 months ago) and its FMV at the time of donation was $25,000. In this situation, the taxpayer would be limited to a $15,000 ($30,000 AGI x 50%) donation this year but could carry forward (for 5 years) the remaining difference between the basis on the 50% limitation of $5,000.

Situation 2: Same facts as the problem above except the stock was purchased for $20,000 (10 years ago) and its FMV at the time of donation was $25,000. In this situation, the taxpayer would be limited to a $9,000 ($30,000 AGI x 30%) donation this year but could carry forward (for 5 years) the remaining difference between the basis on the 30% limitation of $16,000.

Situation 3: Same facts as the problem above except the taxpayer also gave $5,000 cash, stock that was purchased 10 years ago for $2,000 and now has a FMV of $10,000, as well as the stock that was purchased 4 months ago for $1,500 and has a FMV of $3,000.

Maximum allowed for charitable contributions on current year return: $15,000 ($30,000 AGI x 50%)

Current Year Deduction:

Cash $5,000

Long-term stock: $9,000 (limited to 30% of AGI for current year)

Short-term stock: $1,000 (cannot exceed $15,000 in total deductible contributions)

Total: $15,000

Carry forward amounts:

Long-term stock $1,000

Short-term stock $500

Total: $1,500

**You could also deduct only $4,500 from the cash contribution, allow $500 of the cash contribution to carry forward, and the full basis of the short-term stock to be deducted in the current year. It really doesn't matter as long as you separate them into 50% and 30% categories with the remainder to be carried forward**

Hope this helps!

BEC - Feb 2012: 80
AUD - Feb 2012: 84
FAR - Apr 2012: 78
REG - May 2012: 90

Thanks Becker!

[whatkey]

it's 50%. Think of ST stocks like cash

Using Becker, Ninja Notes, and CpaReviewForFree

FAR - 87 (2/17)
REG - 89 (4/21)
AUD - 89 (5/31)
BEC - 89 (7/11)

[nolifecpa]

here are the rules for ST stuff:

ST property (like land or buildings): deduct basis up to 30% of AGI

ST intangibles (like stocks): deduct basis up to 50% of AGI

we are getting confused with the verbiage being used, i think becker said “ST property” when they meant to say “ST intangibles” so 50% should be used

FYI, LT property and LT intangibles: deduct FMV up to 30% of AGI

REG-65,71,74,73,70,74,79
BEC-60's,60's,69,71,76*,78
FAR-67,66,65,79
AUD-54,60's,65,83*,69,80
*expired

DONE

[Julie5038]

For cash and short term property you allowed to deduct up to 50% of AGI using the NBV of property. For long term property you can deduct up to 30% of AGI using the FMV of the property.

[Author]

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