Ruth Lewis has adjusted gross income of $100,000 for
2012 and itemizes her deductions. On September 1, 2012, she
made a contribution to her church of stock held for investment
for two years that cost $10,000 and had a fair market value of
$70,000. The church sold the stock for $70,000 on the same
date. Assume that Lewis made no other contributions during
2012 and made no special election in regard to this contribution
on her 2012 tax return. How much should Lewis claim as a charitable
contribution deduction for 2012?
(b) The requirement is to determine Lewis’ charitable
contribution deduction. The donation of appreciated stock held
more than twelve months is a contribution of intangible, longterm
capital gain appreciated property. The amount of contribution
is the stock’s FMV of $70,000, but is limited in deductibility
for 2012 to 30% of AGI. Thus, the 2012 deduction is $100,000 ×
30% = $30,000. The amount of contribution in excess of the 30%
limitation ($70,000 – $30,000 = $40,000) can be carried forward
for up to five years, subject to the 30% limitation in the carryforward
On December 15, 2012, Donald Calder made a contribution
of $500 to a qualified charitable organization, by charging
the contribution on his bank credit card. Calder paid the $500
on January 20, 2013, upon receipt of the bill from the bank. In
addition, Calder issued and delivered a promissory note for
$1,000 to another qualified charitable organization on November
1, 2012, which he paid upon maturity six months later. If
Calder itemizes his deductions, what portion of these contributions
is deductible in 2012?
(b) The requirement is to determine the amount of
contributions deductible in 2012. Charitable contributions are
generally deductible in the year actually paid. The $500 charge
to his bank credit card made on December 15, 2012, is considered
a payment, and is deductible for 2012. The $1,000 promissory
note delivered on November 1, 2012, is not considered a
contribution until payment of the note upon maturity in 2013.
Under a written agreement between Mrs. Norma Lowe
and an approved religious exempt organization, a ten-year-old
girl from Vietnam came to live in Mrs. Lowe’s home on August 1,
2012, in order to be able to start school in the US on September
3, 2012. Mrs. Lowe actually spent $500 for food, clothing,
and school supplies for the student during 2012, without receiving
any compensation or reimbursement of costs. What portion
of the $500 may Mrs. Lowe deduct on her 2012 income tax return
as a charitable contribution?
(b) The requirement is to determine the amount of
student expenses deductible as a charitable contribution. A taxpayer
may deduct as a charitable contribution up to $50 per
school month of unreimbursed expenses incurred to maintain a
student (in the 12th or lower grade) in the taxpayer’s home pursuant
to a written agreement with a qualified organization. Since
the student started school in September, the amount deductible
as a charitable contribution is $50 × 4 = $200.
During 2012, Vincent Tally gave to the municipal art museum
title to his private collection of rare books that was assessed
and valued at $60,000. However, he reserved the right to the
collection’s use and possession during his lifetime. For 2012, he reported an adjusted gross income of $100,000. Assuming that
this was his only contribution during the year, and that there
were no carryovers from prior years, what amount can he deduct
as contributions for 2012?
(a) Vincent Tally is not entitled to a deduction for
contributions in 2012 because he did not give up his entire interest
in the book collection. By reserving the right to use and possess
the book collection for his lifetime, Vincent Tally has not
made a completed gift. Therefore, no deduction is available. The
contribution will be deductible when his entire interest in the
books is transferred to the art museum.
Jimet, an unmarried taxpayer, qualified to itemize 2012
deductions. Jimet’s 2012 adjusted gross income was $30,000 and
he made a $2,000 cash donation directly to a needy family. In
2012, Jimet also donated stock, valued at $3,000, to his church.
Jimet had purchased the stock four months earlier for $1,500.
What was the maximum amount of the charitable contribution
allowable as an itemized deduction on Jimet’s 2012 income tax
(b) The requirement is to determine the maximum
amount of charitable contribution allowable as an itemized deduction
on Jimet’s 2012 income tax return. If appreciated property
is contributed, the amount of contribution is generally the
property’s FMV if the property would result in a long-term capital
gain if sold. If not, the amount of contribution for appreciated
property is generally limited to the property’s basis. Here, the
stock worth $3,000 was purchased for $1,500 just four months
earlier. Since its holding period did not exceed twelve months, a
sale of the stock would result in a short-term capital gain, and the
amount of allowable contribution deduction is limited to the
stock’s basis of $1,500. Additionally, to be deductible, a
contribution must be made to a qualifying organization. As a
result, the $2,000 cash given directly to a needy family is not deductible.
Taylor, an unmarried taxpayer, had $90,000 in adjusted
gross income for 2012. During 2012, Taylor donated land to a
church and made no other contributions. Taylor purchased the
land in 1999 as an investment for $14,000. The land’s fair market
value was $25,000 on the day of the donation. What is the maximum
amount of charitable contribution that Taylor may deduct
as an itemized deduction for the land donation for 2012?
(a) The requirement is to determine the maximum
amount of charitable contribution deductible as an itemized
deduction on Taylor’s tax return for 2012. The donation of appreciated
land purchased for investment and held for more than
twelve months is a contribution of real capital gain property
(property that would result in long-term capital gain if sold).
The amount of contribution is the land’s FMV of $25,000, limited
in deductibility for the current year to 30% of AGI. In this
case, since 30% of AGI would be 30% × $90,000 = $27,000, the
full amount of the land contribution ($25,000) is deductible for
In 2012, Joan Frazer’s residence was totally destroyed by
fire. The property had an adjusted basis and a fair market value
of $130,000 before the fire. During 2012, Frazer received insurance
reimbursement of $120,000 for the destruction of her home.
Frazer’s 2012 adjusted gross income was $70,000. Frazer had no
casualty gains during the year. What amount of the fire loss was
Frazer entitled to claim as an itemized deduction on her 2012 tax
(a) The requirement is to determine the amount of the
fire loss to her personal residence that Frazer can claim as an
itemized deduction. The amount of a personal casualty loss is
computed as the lesser of (1) the adjusted basis of the property
($130,000), or (2) the decline in the property’s fair market value
resulting from the casualty ($130,000 – $0 = $130,000); reduced
by any insurance recovery ($120,000), and a $100 floor. Since
Frazer had no casualty gains during the year, the net casualty loss
is then deductible as an itemized deduction to the extent that it
exceeds 10% of adjusted gross income.
Fire loss $ 130,000
Insurance proceeds (120,000)
$100 floor (100)
10% of $70,000 AGI (7,000)
Casualty loss itemized deduction $ 2,900
Alex and Myra Burg, married and filing joint income tax
returns, derive their entire income from the operation of their
retail candy shop. Their 2012 adjusted gross income was
$50,000. The Burgs itemized their deductions on Schedule A for
2012. The following unreimbursed cash expenditures were
among those made by the Burgs during 2012:
Repair of glass vase accidentally broken in home by
dog; vase cost $500 in 2009; fair value $600 before
accident and $200 after accident $90
Without regard to the $100 “floor” and the adjusted gross income
percentage threshold, what amount should the Burgs deduct
for the casualty loss in their itemized deductions on Schedule
A for 2012?
(a) The requirement is to determine the amount the
Burgs should deduct for the casualty loss (repair of glass vase
accidentally broken by their dog) in their itemized deductions. A
casualty is the damage, destruction, or loss of property resulting
from an identifiable event that is sudden, unexpected, or unusual.
Deductible casualty losses may result from earthquakes, tornadoes,
floods, fires, vandalism, auto accidents, etc. However, a loss
due to the accidental breakage of household articles such as
glassware or china under normal conditions is not a casualty loss.
Neither is a loss due to damage caused by a family pet.
Hall, a divorced person and custodian of her twelve-yearold
child, filed her 2012 federal income tax return as head of a
household. During 2012 Hall paid a $490 casualty insurance
premium on her personal residence. Hall does not rent out any
portion of the home, nor use it for business.
The casualty insurance premium of $490 is
(d) The requirement is to determine the proper treatment
of the $490 casualty insurance premium. Casualty insurance
premiums on an individual’s personal residence are considered
nondeductible personal expenses. Even though a casualty is
actually incurred during the year, no deduction is available for
personal casualty insurance premiums.
Which of the following is not a miscellaneous itemized
(d) The requirement is to determine which item is not a
miscellaneous itemized deduction. A legal fee for tax advice related
to a divorce, IRA trustee’s fees that are separately billed and
paid, and an appraisal fee for valuing a charitable contribution
qualify as miscellaneous itemized deductions subject to the 2% of
AGI floor. On the other hand, the check writing fees for a personal
checking account are a personal expense and not deductible.