Joseph Thompson is president and sole shareholder of Jay Corporation. In Decembe
ID: 2415166 • Letter: J
Question
Joseph Thompson is president and sole shareholder of Jay Corporation. In December 2015, Joe asks your advice regarding a charitable contribution he plans to have the corporation make to the University of Maine, a qualified public charity. Joe is considering the following alternatives as charitable contributions in December 2015:
Fair Market Value
(1)
Cash donation
$200,000
(2)
Unimproved land held for six years ($110,000 basis)
200,000
(3)
Maize Corporation stock held for eight months ($140,000 basis)
200,000
(4)
Brown Corporation stock held for nine years ($360,000 basis)
200,000
Joe has asked you to help him decide which of these potential contributions will be most advantageous taxwise. Jay's taxable income is $3,500,000 before considering the contribution.
Rank the four alternatives, and complete the letter to Joe communicating your advice.
Note: The land and stock are "unrelated use property" but they are not "tangible personal property".
Hoffman, Maloney, Raabe, & Young, CPAs
5191 Natorp Boulevard
Mason, OH 45040
December 10, 2015
Mr. Joseph Thompson
Jay Corporation
1442 Main Street
Freeport, ME 04032
Dear Mr. Thompson:
I have evaluated the proposed alternatives for your 2015 year-end contribution to the University of Maine. I recommend that you sell the Brown Corporation stock and donate the proceeds to the University. The four alternatives are discussed below.
Donation of cash, the unimproved land, or the Brown Corporation stock each will result in a $ __________ charitable contribution deduction. Donation of the Maize Corporation stock will result in only a $ ______________charitable contribution deduction.
You will benefit in two ways if you sell the Brown Corporation stock and give the $ __________in proceeds to the University. Donation of the proceeds will result in a $ ___________charitable contribution deduction. In addition, sale of the stock will result in a $ _________ long-term capital ______________. If Jay Corporation had capital __________________of at least $ ___________ and paid corporate income tax in the past three years, the entire _______________could be ________________and Jay would receive tax refunds for the carryback years. If Jay Corporation _______________capital gains in the carryback years, the capital loss could be carried forward and offset against capital gains of the corporation for up to _______________years.
Jay Corporation ________________ make the donation in time for the 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.
I will be pleased to discuss my recommendation in further detail if you wish. Please call me if you have questions. Thank you for consulting my firm on this matter. We look forward to serving you in the future.
Sincerely,
Richard Stinson, CPA
Fair Market Value
(1)
Cash donation
$200,000
(2)
Unimproved land held for six years ($110,000 basis)
200,000
(3)
Maize Corporation stock held for eight months ($140,000 basis)
200,000
(4)
Brown Corporation stock held for nine years ($360,000 basis)
200,000
Explanation / Answer
Hoffman, Maloney, Raabe, & Young, CPAs
5191 Natorp Boulevard
Mason, OH 45040
December 10, 2015
Mr. Joseph Thompson
Jay Corporation
1442 Main Street
Freeport, ME 04032
Dear Mr. Thompson:
I have evaluated the proposed alternatives for your 2015 year-end contribution to the University of Maine. I recommend that you sell the Brown Corporation stock and donate the proceeds to the University. The four alternatives are discussed below.
Donation of cash, the unimproved land, or the Brown Corporation stock each will result in a $ 200,000 charitable contribution deduction. Donation of the Maize Corporation stock will result in only a $ 140,000 charitable contribution deduction.
You will benefit in two ways if you sell the Brown Corporation stock and give the $ 200,000 in proceeds to the University. Donation of the proceeds will result in a $ 200,000 charitable contribution deduction. In addition, sale of the stock will result in a $ 160,000 long-term capital loss_. If Jay Corporation had capital gains of at least $ 160000 and paid corporate income tax in the past three years, the entire loss could be carried back_and Jay would receive tax refunds for the carryback years. If Jay Corporation had no capital gains in the carryback years, the capital loss could be carried forward and offset against capital gains of the corporation for up to five years.
Jay Corporation should make the donation in time for the 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.
I will be pleased to discuss my recommendation in further detail if you wish. Please call me if you have questions. Thank you for consulting my firm on this matter. We look forward to serving you in the future.
Sincerely,
Richard Stinson, CPA
Hoffman, Maloney, Raabe, & Young, CPAs
5191 Natorp Boulevard
Mason, OH 45040
December 10, 2015
Mr. Joseph Thompson
Jay Corporation
1442 Main Street
Freeport, ME 04032
Dear Mr. Thompson:
I have evaluated the proposed alternatives for your 2015 year-end contribution to the University of Maine. I recommend that you sell the Brown Corporation stock and donate the proceeds to the University. The four alternatives are discussed below.
Donation of cash, the unimproved land, or the Brown Corporation stock each will result in a $ 200,000 charitable contribution deduction. Donation of the Maize Corporation stock will result in only a $ 140,000 charitable contribution deduction.
You will benefit in two ways if you sell the Brown Corporation stock and give the $ 200,000 in proceeds to the University. Donation of the proceeds will result in a $ 200,000 charitable contribution deduction. In addition, sale of the stock will result in a $ 160,000 long-term capital loss_. If Jay Corporation had capital gains of at least $ 160000 and paid corporate income tax in the past three years, the entire loss could be carried back_and Jay would receive tax refunds for the carryback years. If Jay Corporation had no capital gains in the carryback years, the capital loss could be carried forward and offset against capital gains of the corporation for up to five years.
Jay Corporation should make the donation in time for the 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.
I will be pleased to discuss my recommendation in further detail if you wish. Please call me if you have questions. Thank you for consulting my firm on this matter. We look forward to serving you in the future.
Sincerely,
Richard Stinson, CPA
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