Pat died this year.Before she died,Pat gave 5,000 shares of stock in Coyote Corporation (a publicly traded corporation)to her church (a qualified charitable organization).The stock was worth $180,000 and she had acquired it as an investment four years ago at a cost of $150,000.In the year of her death,Pat had AGI of $300,000.In completing her final income tax return,how much of the charitable contribution should Pat's executor deduct?

Question

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Under the general rule concerning capital gain property,Pat's executor could deduct $90,000 (30% of $300,000 AGI).The remaining $90,000 [$180,000 (fair market value of the Coyote Corporation stock)-$90,000 (current deduction)] would be lost because there is no five­year carryover period in Pat's case because of her death.Pat's executor can,however,make the reduced deduction election,which moves the capital gain property from the 30% limitation to the 50% limitation with no further carryover.To do so,the executor must forgo a deduction of the $30,000 appreciation [$180,000 (fair market value)- $150,000 (cost)] of the stock.Thus,the charitable contribution deduction on Pat's final income tax return becomes $150,000 (50% of $300,000 AGI).By making the reduced deduction election,the charitable deduction on Pat's final return is increased by $60,000 [$150,000 (allowed under the reduced deduction election)- $90,000 (allowed under the general rule)].

Pat Died This Year