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Ramon had AGI of $193,000 in 2018. He is considering making a charitable contribution this year...

Ramon had AGI of $193,000 in 2018. He is considering making a charitable contribution this year to the American Heart Association, a qualified charitable organization. Determine the current allowable charitable contribution deduction in each of the following independent situations, and indicate the treatment for any amount that is not deductible currently.

a. A cash gift of $96,500. In the current year, Ramon may deduct $96,500______ since his charitable contribution is limited to $_______ .

b. A gift of OakCo stock worth $96,500 on the contribution date. Ramon had acquired the stock as an investment two years ago at a cost of $86,850. The stock's value for determining the contribution is $96,500 . The deduction for 2018 is $________ . The remaining $________ can be carried forward for 5 years.

c. A gift of a painting worth $96,500 that Ramon purchased three years ago for $86,850. The charity has indicated that it would sell the painting to generate cash to fund medical research.

The contribution is valued at $86,850. The amount deductible in the current year is $86,850

d. Ramon has decided to make a cash gift to the American Heart Association of $135,100. However, he is considering delaying his gift until next year when his AGI will increase to $300,000 and he will be in the 32% income tax bracket, an increase from his current-year income tax bracket of 24%. Assume a 6% discount rate.

The present value factors, at a 6% discount rate, are as follows:

Year PV Factor at 6%
1 0.9434
3 0.8396
5 0.7473

If required, round your final answers to the nearest dollar.

Ramon asks you to determine the tax savings from the tax deduction in present value terms if he were to make the gift this year, rather than delaying the gift until next year. For purposes of this analysis, ignore the potential impact of the overall limitation on certain itemized deductions.

Total present value of tax savings from the tax deduction if made this year: $___________
Total present value of tax savings from the tax deduction if made next year: $__________

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Answer #1

(a) In the current year, Ramon may deduct $96500 since his charitable contribution is limited to $96500 i.e(50% of $193000 AGI.

(b) he stock's value for determining the contribution is $96,500

The deduction for 2018 is $57900 (30% of $193000 AGI)

The remaining $38600 ($96500 − $57900) can be carried forward for five years.

C The contribution is valued at $86,850. The amount deductible in the current year is $86,850

D The amount is fully deductible in the current year because the gift is below the applicable 50% of AGI limitation

Total present value of tax savings from the tax deduction if made this year: $96500 x 24% $23610
Total present value of tax savings from the tax deduction if made next year: $96500x 32% x .9434 $29,132
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