In December of each year, Gracie contributes 15% of her gross income to the Amer
ID: 2536500 • Letter: I
Question
In December of each year, Gracie contributes 15% of her gross income to the American Red Cross (a 50% organization). Gracie is in the 33% marginal tax bracket and is considering the following alternatives as charitable contributions for the year:
a) Cash FMV= $25,000
b) Panther Stock held for 3 years ($30,000 basis) FMV= $25,000
c) Unimproved land held for 10 months ($20,000 basis) FMV= $25,000
d) Cougar Stock held for 8 years (basis $5,000) FMV= $25,000
Which option would be the most advantageous for tax purposes? Why?
(Hint: What would be the amount of the charitable contribution for each of the four options?)
Explanation / Answer
1) Cash Charitable contribution is $25000 2) Panther stock Charitable contribution is $30000 3) Unimproved land Charitable contribution is $25000 4) Coughar stock Charitable contribution is $25000 For charitable contribution we use FMV and if the basis is more than FMV than we use basis of the asset. The most advantageous option is Panther stock held for 3 years as the chartiable contribution of $30000 is highest among all the options