In December of each year, Eleanor Young contributes 10% of her gross income to t
ID: 2445588 • Letter: I
Question
In December of 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 ($3,000 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 taxwise. Evaluate the four alternatives, and write a letter to Eleanor to communicate your advice to her. Her address is 2622 Bayshore Drive, Berkeley, CA 94709.
Explanation / Answer
To,
Eleanor
2622 Bayshore Drive, Berkeley, CA 94709.
As per data provided by you, I want to inform you option wise detailed analysis is as follow;
1. By donating $23,000 as cash you can save only tax on $23,000, that will be $6440.
2. When he you gives donation in form of Unimproved land then you will get double benefit;
3. When he you gives donation in form of Blue Corporation stock then you will get double benefit;
4. When he you gives donation in form of Gold Corporation stock then you will get only tax benefit on $23000 at a 28% tax rate because capital gains tax benefit will not be available here as base value is more than sales value.
Thus Eleanor should make donation in form of in form of Unimproved land, that will save maximum tax.
Thanks