Robert & Becky( husband & wife) are both foyer and they contribute money to various organization each year. They file a joint return and their adjusted gross income for 2014 is $ 100,000.They
contributed to the following organization in 2014 :
$ 5,000 to ALTA SIERRA COUNTRY CLUS.
$ 10,000 TO PREVENT CRUELTY TO ANIMALS
$ 2,000 TO STATE BAR ASSOCIATION POLITICAL action committee .
$ 12,000 to cancer research foundation
Donated clothing to salvation army (Robert purchased the items for $ 1,000,
but the fair market, value of the same items at a thrift store is equal to $ 50 ).How much can Robert & Becky deduct
as charitable comtributions for the year 2014 ? a. $29,005, b. $22,050, c.
$ 25,000 , d. $ 24,000 .
And you think ... ?
To calculate the deductible amount of charitable contributions for Robert and Becky, we need to consider the rules set by the Internal Revenue Service (IRS).
1. The first step is to determine which organizations qualify for charitable deductions. Generally, contributions made to organizations that are religious, charitable, educational, scientific, or literary in nature qualify for deductions. Therefore, we need to check if the organizations they donated to meet these criteria:
- ALTA SIERRA COUNTRY CLUB: It is unclear if this organization qualifies as charitable based on the given information.
- PREVENT CRUELTY TO ANIMALS: This organization likely qualifies as charitable.
- STATE BAR ASSOCIATION POLITICAL ACTION COMMITTEE: This organization does not qualify as charitable since political organizations are not eligible.
- CANCER RESEARCH FOUNDATION: This organization likely qualifies as charitable.
2. The second step is to calculate the allowable deductions.
- ALTA SIERRA COUNTRY CLUB: Since it is unclear if this organization qualifies as charitable, we cannot include this contribution in the deductible amount.
- PREVENT CRUELTY TO ANIMALS: This $10,000 contribution qualifies.
- STATE BAR ASSOCIATION POLITICAL ACTION COMMITTEE: This $2,000 contribution does not qualify.
- CANCER RESEARCH FOUNDATION: This $12,000 contribution qualifies.
3. The third step is to consider the limitation on charitable contributions. The limitation is based on a percentage of the taxpayer's adjusted gross income (AGI). In 2014, the limit for cash contributions to public charities was 50% of AGI.
Since the total eligible contributions amount to $22,000 ($10,000 + $12,000), we need to compare this amount to 50% of Robert and Becky's AGI, which is $50,000 ($100,000 * 0.50).
The maximum allowable deduction is the lesser of the two amounts:
- $22,000 (total eligible contributions)
- $50,000 (50% of their AGI)
Therefore, the deductible amount of charitable contributions for Robert and Becky in 2014 would be $22,000.
Answer: b. $22,050