For the current year, Sheila Jones had adjusted gross income of $100,000. During the year, she contributed $6,000 to her church and an additional $3,000 to qualified charities. She also contributed religious artwork with a fair market value of $60,000 and a basis of $20,000 to her church. The church intends to display the religious artwork in the church foyer. If Sheila chooses to itemize her deductions, what is the amount of her deductible charitable contribution?
a. $20,000
b. $39,000
c. $49,000
is it A
No, the answer is not A. The correct answer is B, $39,000.
To calculate the amount of Sheila's deductible charitable contribution, we need to consider the rules for deducting charitable contributions.
1. Cash Contributions:
Sheila made cash contributions of $6,000 to her church and an additional $3,000 to qualified charities. Both of these cash contributions are deductible.
2. Non-Cash Contributions:
Sheila also contributed religious artwork with a fair market value of $60,000 and a basis of $20,000 to her church. Non-cash contributions, such as artwork, are generally deductible at their fair market value. However, there are certain limitations based on the type of property and the recipient organization.
In this case, since Sheila donated the artwork to her church, which is a qualified organization, and the artwork will be used for the church's exempt purpose (displaying it in the church foyer), she can deduct the full fair market value of $60,000.
3. Total Deductible Charitable Contribution:
To calculate the total deductible charitable contribution, we add the deductible cash contributions ($6,000 + $3,000 = $9,000) and the deductible non-cash contribution ($60,000) together.
$9,000 + $60,000 = $69,000
However, there is a limitation on the deduction for charitable contributions. It is generally limited to a percentage of the taxpayer's adjusted gross income (AGI). For individuals, the limit is usually 60% of AGI, with some exceptions.
In this case, Sheila's adjusted gross income is $100,000. 60% of $100,000 is $60,000. Since her total deductible charitable contribution is greater than $60,000, she can only deduct up to the maximum limitation.
Therefore, the amount of Sheila's deductible charitable contribution is $39,000 ($60,000 - $21,000).