LO.6, 9 In December each year, Eleanor Young contributes 10% of her gross income

Question

LO.6, 9 In December each year, Eleanor Young contributes 10% of her gross income to the United Way (a 50% organization). Eleanor, who is in the 28% marginal tax bracket, is considering the following alternatives for satisfying the contribution.

                                                                                                Fair Market Value

(1) Cash Donation                                                                               $23,000

(2) Unimproved land held for six years ($3,000 basis)                       23,000

(3) Blue Corporation stock held for eight months ($3000 basis)       23,000

(4) Gold Corporation stock held for two years ($28,000 basis)         23,000

Eleanor has asked you to help her decide which of the potential contributions listed above will be most advantageous tax wise. Evaluate the four alternatives and write a letter to Eleanor to communicate your advice to her. Her address is 2622 Bayshore Dive, Berkeley, CA 94709.

Explanation / Answer

Eleanor can go ahead and make any of the contributions she wants as every type of contribution listed above has a 50% cap (maximum limit for deduction) of the gross income. In this case it is 10% of the gross income. Hence any type of contributions can be made to get an advantage tax wise.

Related Questions

Navigate

• Browse (All)
• Browse L
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.