chapter 7 cont charitable contributions n.
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Chapter 7(cont) Charitable Contributions. Limited to 50% of AGI Deduction taken in year of contribution, regardless of taxpayer’s method of accounting Must be made to a qualified organization Contributions to a needy individual is not deductible. Qualifying organization. Public Charity

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chapter 7 cont charitable contributions
Chapter 7(cont) Charitable Contributions
  • Limited to 50% of AGI
  • Deduction taken in year of contribution, regardless of taxpayer’s method of accounting
  • Must be made to a qualified organization
  • Contributions to a needy individual is not deductible
qualifying organization
Qualifying organization
  • Public Charity
    • church, educational institution, hospitals, government unit, private operating foundations, government sponsored organizations to administer university properties and etc.
  • Private non-operating foundation - does not receive funding from general public
types of contribution
Types of contribution
  • Cash received
  • Noncash property
    • value of property depends on type of property donated and qualifying organization in which the property is donated
    • Property donated that is smaller than the donor’s entire interest is not considered as charitable contributions
type of property
Type of property
  • Capital Gain property
    • holding period > 1 year
    • Amount of donation is its FMV
    • exception 1 - private nonoperating foundation, FMV is reduced by capital gain that would be recognized if sold
    • exception 2 - unrelated use property - contributed to public charity but not for the use of charity purpose - FMV is reduced by capital gain (immediate sale is considered as unrelated use)
ordinary income property
Ordinary income property
  • Holding period < 1 year
  • Property that would result in the recognition of income taxed at ordinary income rates if the property were sold. Includes inventory , works of art and capital held < 1yr
  • Exception 1 - corporation donating inventory for the ill, needy and infants
  • Exception 2 - donation of scientific equipment to college/university for research by manufacturer or computer software to elementary/secondary school (subject to limitation)
  • Exception 1 & 2 - amount = FMV = 0.5*(gain recognized) limited to twice of adjusted basis of property
services contributed
Services contributed
  • Only unreimbursed expenses of the following are deductible
    • Transportation ($0.14 a mile)
    • Meals (50%) and Lodging
    • Uniform
  • Opportunity costs for services contributed is not deductible
limitation amount
Limitation amount
  • Max - 50% of AGI
  • Excess is carry forward for the subsequent 5 years
  • Capital gain property contributed to public charity is limited to 30% of AGI
  • Ordinary and cash property contributed to private nonoperating foundation is also limited to 30% of AGI
  • Contributions of capital gain property to private nonoperating foundation are limited to the lesser of 20% of taxpayer’s AGI or 30% of taxpayer’s AGI reduced by capital gain contributed to public charity
  • Contributions to athletics events in return for the right to purchase tickets (80% limitation)
  • Apply 50% limitation contributions first and then the 30% limitation
  • Carryover amounts subject to the same % limitations. Deductions for current year is applied first.
miscellaneous items
Miscellaneous items
  • Accrual method corporate taxpayer can deduct a pledge made if the contribution is made on 15th day of 3rd month following the close of the year
  • Corporate charitable deductions are limited to 10% of taxable income.

Tax-planning

  • May be beneficial to take election to reduce contribution amount to adjusted basis in order to deduct up to 50% of AGI (lose carryforward)
  • Decision to sell and donate - for property that has decreased in value