TCOs 4 and 5) Grocer Services Corporation (a
calendar-year taxpayer), a wholesale distributor of food, made the
following donations to qualified charitable organizations during
the year:
Adjusted Basis
Fair Market Value
Food (held as inventory) donated to the Ohio Children's Shelter
$3,500
$8,000
Passenger van to Ohio Children's Shelter, to be used to transport children to school
$7,500
$7,100
Stock in Acme Corporation acquired 7 months ago and held as an investment, donated to Southwest University
$4,000
$6,200
How much qualifies for the charitable contribution deduction?
$15,000
$16,850
$17,250
$19,450
None of the above
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Since Grocer Services is a corporation and the inventory exception is met, one-half of the appreciation on the food may be claimed, or $2250 [1/2 of ($8,000 – $3,500)]. Therefore, $5750 ($3,500 + $2250 appreciation) is allowed as a deduction. Because the Acme stock is short-term capital gain property and not tangible personalty, the deduction is not based on fair market value ($7100). The deduction for the delivery van, which is not a capital asset, is limited to the lesser of adjusted basis or fair market value ($7100). Thus, $5750 + $7100 + $7100 = $16,850
Answer isB)$16850
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