An individual has Net Income For Tax Purposes of $147,500. During the current year, the individual donates a depreciable capital asset with a fair market value of $300,000. The capital cost of this asset is $225,000 and it has a UCC $147,000. It is the only asset in its CCA class and no additions are made subsequent to the gift. If he elects to have the donation valued at its fair market value, what is the maximum amount that this individual can claim as the basis for his charitable donations tax credit for the current year?

Question

Quizplus · Accepted Answer

The maximum amount that can be claimed as the basis for the charitable donations tax credit is calculated as the lesser of the fair market value and the capital gain. In this case, since the individual donated a depreciable capital asset, a capital gain must be calculated. The capital gain is calculated as the fair market value ($300,000) minus the UCC ($147,000), which equals $153,000. Since the capital gain is less than the fair market value, the maximum amount that can be claimed as the basis for the charitable donations tax credit is $139,500, which is calculated as the capital cost ($225,000) plus half of the capital gain ($153,000/2 = $76,500). Therefore, the correct answer is choice C.

An Individual Has Net Income for Tax Purposes of $147,500