Clayton contributes land to the American Red Cross for use as a future site for a new building.His AGI is $50,000.Clayton paid $20,000 for the land eight months ago but its market value at the date of contribution is $25,000.With no special elections,Clayton's deductible contribution this year is
A)$7,000.
B)$18,000.
C)$20,000.
D)$25,000.

Question

Quizplus · Accepted Answer

The amount of the deduction for a charitable contribution of appreciated property is generally the property's fair market value at the time of the contribution. In this case, Clayton contributed land with a fair market value of $25,000, so that is the maximum amount he could deduct. However, there is also a rule that limits the deduction for contributions of property held for less than one year to the lesser of cost basis or fair market value. Since Clayton owned the land for only eight months, he must use his cost basis of $20,000 as the amount of his deduction. So, the maximum deduction he could take would be $20,000.

Clayton Contributes Land to the American Red Cross for Use