Smith, a single individual, made the following charitable contributions during the current year. Smith’s adjusted gross income is $60,000.

個人所得稅慈善贈與稅收制

Donation to Smith’s church $5,000

Art work donated to the local art museum

(Smith purchased it for $2,000 four months ago and a local art dealer appraised it for) 3,000

Contribution to a needy family 1,000

What amount should Smith deduct as a charitable contribution?

a. $5,000

b. $8,000

c. $9,000

d. $7,000

Explanation

Choice "d" is correct. This question is asking for the actual deduction and requires the candidate to determine which items are deductible charitable contributions. The $5,000 donation to the church is allowable. The artwork donated to the local art museum is deductible to its basis, $2,000. Although it is appreciated property, Smith held the property for only four months, making it short-term capital gain property. Donations of short-term capital gain property are deductible to the donor to the extent of his/her adjusted basis. The contribution to a needy family is not a deductible contribution, as it was not made to a qualifying organization.

Choice "a" is incorrect. This choice excludes the donation of the artwork to the art museum.

Choice "b" is incorrect. This choice erroneously includes the donation of the artwork at the art's fair market value.

Choice "c" is incorrect. This choice includes all three contributions. It erroneously includes the artwork at its fair market value as well as including the donation to the needy family, which is not a deductible donation.