Canny Foods Co. is considering three ways it could contribute to a local, qualified charity. First, it could give $5,000 in cash. Second, it could give stock it initiallypurchased two years ago for $4,000 but is now worth $6,000. Third, it could give items of inventory with a fair market value of $7,000 but with an adjusted basis of $3,000. Which of the following correctly describes the relation among possible charitablecontributions in terms of amount deductible for tax purposes?
A) Stock Cash Inventory.
B) Inventory Stock Cash.
C) Inventory Cash Stock.
D) Cash Stock Inventory.

Question

Canny Foods Co. is considering three ways it could contribute to a local, qualified charity. First, it could give $5,000 in cash. Second, it could give stock it initiallypurchased two years ago for $4,000 but is now worth $6,000. Third, it could give items of inventory with a fair market value of $7,000 but with an adjusted basis of $3,000. Which of the following correctly describes the relation among possible charitablecontributions in terms of amount deductible for tax purposes?
A) Stock > Cash > Inventory.
B) Inventory > Stock > Cash.
C) Inventory > Cash > Stock.
D) Cash > Stock > Inventory.

Quizplus · Accepted Answer

The stock donation is deductible at its fair market value of $6,000, the cash donation is deductible at $5,000, and the inventory donation is limited to its adjusted basis of $3,000.