need help with this question. It concerns 2015 Federal income Tax. Multiple Atte

Question

need help with this question. It concerns 2015 Federal income Tax.

Multiple Attempts Not allowed. This test can only be taken once. Force Completion This test can be saved and resumed at any point until time has expired. The timer will continue to run if you leave test. Moving to another question will save this response. Byron owned stock in Blossom Corporation that he donated to a museum (a qualified charitable organization) on June 8 this year. What is the amount of Byron's deduction assuming that he had purchased the stock for dollar 10,500 last year on August 7, and the stock had a fair market value of dollar 13,800 when he made the donation? dollar 3,300. dollar 10,500. dollar 12,150. dollar 13,800. Moving to another question will save this response

Explanation / Answer

Answer :

Answer : b. $ 10,500

Explanation

Securities held long-term: In general, if an individual donates securities held long-term to a “public” charity, such as a church, educational institution, health care organization, or other cause, the amount he or she can claim as a charitable gift for federal income tax purposes is the securities’ fair market value on the date of the gift. See Internal Revenue Code section 170(b)(1)(A).

“Long-term” means at least 12 months and one day. See IRC section 1222(3). The holding period to qualify as long-term property for deduction of appreciated property gifts at full market value remains 12 months and a day.

Securities held short-term: The amount that can be claimed as a charitable gift in the case of donated securities held short-term, on the other hand, is the donor’s cost basis in the securities if the cost basis is less than the securities’ fair market value. See IRC section 170(e)(1)(A).

Securities that have declined in value: Shares that have gone down in value since being purchased generally should not be donated, because a gift of such an investment does not cause the potential capital loss to be realized for federal income tax purposes. Instead, the donor should sell the shares to realize the loss and then give the cash from the sale.

So here holding Period from August 7 (Last year) to June 8 (This year) is less than 12 months So Securities are held for short-term. Cost of Investment is $ 10,500 which is less than fair market value of $ 13,800. So amount of deduction will be $ 10,500.

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