Garth Corporation donates inventory having an adjusted basis of $40,000 and an FMV of $150,000 to a qualified public charity. The inventory will be used by the charity to care for the ill. The maximum charitable contribution deduction before consideration of the 10% limitation is

Question

Quizplus · Accepted Answer

The maximum charitable contribution deduction is the adjusted basis plus half the difference between the fair market value (FMV) and the adjusted basis, not to exceed twice the adjusted basis. Here, the adjusted basis is $40,000, and the FMV is $150,000. The difference is $110,000, half of which is $55,000. Adding this to the adjusted basis gives $95,000, but the maximum allowed is twice the adjusted basis, which is $80,000.

Garth Corporation Donates Inventory Having an Adjusted Basis of $40,000