Charitable - Pub 526

Question 1

What is a charitable contribution?

What is a Qualified Organization?

Answer 1

Charitable Contribution = a donation or gift to, or for the use of, a qualified organization. It is voluntary and is made without getting, or expecting to get, anything of equal value.

Qualified organizations include nonprofit groups that are religious, charitable, educational, scientific, or literary in purpose, or that work to prevent cruelty to children or animals

Examples:

1. Churches, synagogues, temples, mosques, and other religious organizations
2. Federal, state, and local governments, if your contribution is solely for public purposes (for example, a gift to reduce the public debt or maintain a public park)
3. Nonprofit schools and hospitals
4. The Salvation Army, American Red Cross, CARE, Goodwill Industries, United Way, Boy Scouts of America, Girl Scouts of America, Boys and Girls Clubs of America, etc. (This also includes nonprofit daycare centers that provide childcare to the general public if substantially all the childcare is provided to enable parents and guardians to be gainfully employed. However, if your contribution is a substitute for tuition or another enrollment fee, it isn’t deductible as a charitable contribution, as explained later under Contributions You Can’t Deduct)
5. War veterans’ groups

Non-Examples:

1. Civic leagues, social and sports clubs, labor unions, and chambers of commerce
2. Foreign organizations (except certain Canadian, Israeli, and Mexican charities)
3. Groups that are run for personal profit
4. Groups whose purpose is to lobby for law changes
5. Homeowners’ associations
6. Individuals
7. Political groups or candidates for public office

50% Limitation Applies to:

1. all public charities (code PC),
2. all private operating foundations (code POF),
3. certain private foundations that distribute the contributions they receive to public charities and private operating foundations within 2-1/2 months following the year of receipt, and
4. certain private foundations the contributions to which are pooled in a common fund and the income and corpus of which are paid to public charities.

30% Limit Applies to:

1. The 30 percent limitation applies to
   
   1. private non-operating foundations (code PF),
   2. private foundations not previously mentioned that qualify for a 50 percent limitation, and
   3. to other organizations described in section 170(c) that do not qualify for the 50 percent limitation, such as domestic fraternal societies (code LODGE).

Question 2

You pay $65 for a ticket to a dinner dance at a church. Your entire $65 payment goes to the church. The ticket to the dinner dance has a fair market value of $25. When you buy your ticket, you know its value is less than your payment. Charitable Deduction?

Answer 2

To figure the amount of your charitable contribution, subtract the value of the benefit you receive ($25) from your total payment ($65). You can deduct $40 as a charitable contribution to the church.

Question 3

At a fundraising auction conducted by a charity, you pay $600 for a week’s stay at a beach house. The amount you pay is no more than the fair rental value. Charitable Deduction?

Answer 3

You haven’t made a deductible charitable contribution

Question 4

You contribute cash to your city’s police department to be used as a reward for information about a crime. Charitable Deduction?

Answer 4

The city police department is a qualified organization, and your contribution is for a public purpose. You can deduct your contribution.

Question 5

You make a voluntary contribution to the social security trust fund, not earmarked for a specific account. Charitable Deduction?

Answer 5

Because the trust fund is part of the U.S. government, you contributed to a qualified organization. You can deduct your contribution.

Question 6

You pay $40 to see a special showing of a movie for the benefit of a qualified organization. Printed on the ticket is “Contribution—$40.” If the regular price for the movie is $8…charitable decution?

Answer 6

your contribution is $32 ($40 payment − $8 regular price)

Question 7

Membership fees or dues?

What Membership Benefits can be disregarded?

Answer 7

You may be able to deduct membership fees or dues you pay to a qualified organization.

However, you can deduct only the amount that is more than the value of the benefits you receive.

You can’t deduct dues, fees, or assessments paid to country clubs and other social organizations. They aren’t qualified organizations.

Benefits Disregarded

1. Both you and the organization can disregard the following membership benefits if you get them in return for an annual payment of $75 or less
   
   1. Any rights or privileges that you can use frequently while you are a member, such as:
      
      1. Free or discounted admission to the organization’s facilities or events,
      2. Free or discounted parking,
      3. Preferred access to goods or services, and
      4. Discounts on the purchase of goods and services.
      5. But, item (1) doesn’t include rights to purchase tickets for seating at an athletic event in an athletic stadium of a college or university as a result of a contribution to such an institution.
   2. Admission, while you are a member, to events open only to members of the organization if the organization reasonably projects that the cost per person (excluding any allocated overhead) isn’t more than $10.80.

Question 8

Can you deduct a charitable contribution to a specific individual?

Can you deduct a charitable contribution of value of time or services?

Answer 8

1. No
   
   1. You can deduct contributions to a qualified organization for flood relief, hurricane relief, or other disaster relief. However, you can’t deduct contributions earmarked for relief of a particular individual or family.
   2. Your son does missionary work. You pay his expenses. You can’t claim a deduction for your son’s unreimbursed expenses related to his contribution of services.
2. No
   
   1. You can’t deduct the value of your time or services, including:
      
      1. Blood donations to the American Red Cross or to blood banks, and
      2. The value of income lost while you work as an unpaid volunteer for a qualified organization

Question 9

What are Qualified Charitable Distributions?

What are the requirements?

Answer 9

A qualified charitable distribution (QCD) is a distribution made directly by the trustee of your individual retirement arrangement (IRA), other than a SEP or SIMPLE IRA, to certain qualified organizations. If all the requirements are met, a QCD is nontaxable, but you can’t claim a charitable contribution deduction for a QCD.

Requirements:

1. You must have been at least age 70.5
2. Your total QCDs for the year can’t be more than $100,000

Question 10

Can you take a deduction for clothing or household items?

What are household requirements?

Answer 10

Requirements:

1. Good Used Condition
   
   1. You can’t take a deduction for clothing or household items you donate unless the clothing or household items are in good used condition or better
2. If you deduct more than $500 for it and include a qualified appraisal of it with your return

What are household requirements?

1. Furniture and furnishings,
2. Electronics,
3. Appliances,
4. Linens, and
5. Other similar items.

Household items don’t include:

1. Food;
2. Paintings, antiques, and other objects of art;
3. Jewelry and gems; and
4. Collections.

Question 11

What are the rules associated with donating Qualified Vehicles?

What are the Two Exceptions?

Answer 11

The following rules apply to any donation of a qualified vehicle. A qualified vehicle is:

1. A car or any motor vehicle manufactured mainly for use on public streets, roads, and highways;
2. A boat; or
3. An airplane

More than 500

1. If you donate a qualified vehicle with a claimed fair market value of more than $500, you can deduct the smaller of:
   
   1. The gross proceeds from the sale of the vehicle by the organization, or • The vehicle’s fair market value on the date of the contribution. If the vehicle’s fair market value was more than your cost or other basis, you may have to reduce the fair market value to figure the deductible amount, as described under Giving Property That Has Increased in Value, later.

Less than $500

1. If the qualified organization sells the vehicle for $500 or less and exceptions 1 and 2 don’t apply, you can deduct the smaller of: • $500, or • The vehicle’s fair market value on the date of the contribution. But if the vehicle’s fair market value was more than your cost or other basis, you may have to reduce the fair market value to get the deductible amount, as described under Giving Property That Has Increased in Value, later

Two Exceptions for deductions of more than $500

1. Exception 1 - Vehicle used or improved by organization
   
   1. If the qualified organization makes a significant intervening use of or material improvement to the vehicle before transferring it, you generally can deduct the vehicle’s fair market value at the time of the contribution.
   2. But if the vehicle’s fair market value was more than your cost or other basis, you may have to reduce the fair market value to get the deductible amount, as described under Giving Property That Has Increased in Value, later
2. Exception 2 - Vehicle given or sold to needy individual
   
   1. . If the qualified organization will give the vehicle, or sell it for a price well below fair market value, to a needy individual to further the organization’s charitable purpose, you generally can deduct the vehicle’s fair market value at the time of the contribution. But if the vehicle’s fair market value was more than your cost or other basis, you may have to reduce the fair market value to get the deductible amount, as described under Giving Property That Has Increased in Value, later. The Form 1098-C (or other statement) will show whether this exception applies.
   2. Not in Auction - This exception doesn’t apply if the organization sells the vehicle at auction. In that case, you can’t deduct the vehicle’s fair market value.

Form 1098-C

1. The Form 1098-C (or other statement) will show the gross proceeds from the sale of the vehicle (If you don’t attach Form 1098-C (or other statement), you can’t deduct your contribution)

Question 12

Anita donates a used car to a qualified organization. She bought it 3 years ago for $9,000. A used car guide shows the fair market value for this type of car is $6,000. However, Anita gets a Form 1098-C from the organization showing the car was sold for $2,900.

Answer 12

Neither exception 1 nor exception 2 applies. If Anita itemizes her deductions, she can deduct $2,900 for her donation. She must attach Form 1098-C and Form 8283 to her return

Question 13

If you contribute property subject to a debt (such as a mortgage), you must reduce the fair market value of the property by:

Answer 13

Reduce FMV by:

1. Any allowable deduction for the interest you paid (or will pay) that is attributable to any period after the contribution, and
2. If the property is a bond, the lesser of:
   
   1. Any allowable deduction for the interest you paid (or will pay) to buy or carry the bond that is attributable to any period before the contribution, or
   2. The interest, including bond discount, receivable on the bond that is attributable to any period before the contribution, and that isn’t includible in your income due to your accounting method.

Why?

• This prevents you from deducting the same amount as both investment interest and a charitable contribution
• If the recipient (or another person) assumes the debt, you also must reduce the fair market value of the property by the amount of the outstanding debt assumed.

Question 14

What is the method to determine FMV for used clothes?

Kristin donated a coat to a thrift store operated by her church. She paid $300 for the coat 3 years ago. Similar coats in the thrift store sell for $50.

Answer 14

There are no fixed formulas or methods for finding the value of items of clothing

Example

1. The fair market value of the coat is $50. Kristin’s donation is limited to $50.

Question 15

How to determine household items FMV?

Answer 15

1. The fair market value of used household items, such as furniture, appliances, and linens, usually is much lower than the price paid when new. These items may have little or no market value because they are in a worn condition, out of style, or no longer useful. For these reasons, formulas (such as using a percentage of the cost to buy a new replacement item) aren’t acceptable in determining value.
2. You should support your valuation with photographs, canceled checks, receipts from your purchase of the items, or other evidence. Magazine or newspaper articles and photographs that describe the items and statements by the recipients of the items also are useful. Don’t include any of this evidence with your tax return.

Question 16

If you contribute a car, boat, or airplane to a charitable organization, you must determine its fair market value

Answer 16

Boats. Except for small, inexpensive boats, the valuation of boats should be based on an appraisal by a marine surveyor or appraiser because the physical condition is critical to the value.

Cars.

1. Certain commercial firms and trade organizations publish used car pricing guides, commonly called “blue books,” containing complete dealer sale prices or dealer average prices for recent model years. The guides may be published monthly or seasonally, and for different regions of the country. These guides also provide estimates for adjusting for unusual equipment, unusual mileage, and physical condition. The prices aren’t “official” and these publications aren’t considered an appraisal of any specific donated property. But they do provide clues for making an appraisal and suggest relative prices for comparison with current sales and offerings in your area.
2. These publications are sometimes available from public libraries, or from the loan officer at a bank, credit union, or finance company. You also can find used car pricing information on the Internet.
3. To find the fair market value of a donated car, use the price listed in a used car guide for a private party sale, not the dealer retail value. However, the fair market value may be less if the car has engine trouble, body damage, high mileage, or any type of excessive wear. The fair market value of a donated car is the same as the price listed in a used car guide for a private party sale only if the guide lists a sales price for a car that is the same make, model, and year, sold in the same area, in the same condition, with the same or similar options or accessories, and with the same or similar warranties as the donated car.

Question 17

You donate a used car in poor condition to a local high school for use by students studying car repair. A used car guide shows the dealer retail value for this type of car in poor condition is $1,600. However, the guide shows the price for a private party sale of the car is only $750.

Answer 17

The fair market value of the car is considered to be $750

Question 18

If you contribute a large number of the same item, fair market value is the price at which comparable numbers of the item are being sold.

You purchase 500 bibles for $1,000. The person who sells them to you says the retail value of these bibles is $3,000. If you contribute the bibles to a qualified organization, you can claim a deduction only for the price at which similar numbers of the same bible are currently being sold.

Answer 18

Your charitable contribution is $1,000, unless you can show that similar numbers of that bible were selling at a different price at the time of the contribution.

Question 19

What happens if you contribute property with a fair market value that is less than your basis in it?

Answer 19

If you contribute property with a fair market value that is less than your basis in it, your deduction is limited to its fair market value.

You can’t claim a deduction for the difference between the property’s basis and its fair market value.

Common examples of property that decrease in value include clothing, furniture, appliances, and cars.

Question 20

What happens if you contribute property with a fair market value that is more than your basis in it?

Answer 20

If you contribute property with a fair market value that is more than your basis in it, you may have to reduce the fair market value by the amount of appreciation (increase in value) when you figure your deduction

Question 21

Do different rules apply to figure your deduction for property classified as:

1. Ordinary Income Property
2. Capital Gain Property

Answer 21

Yes

Question 22

When is property considered ordinary income property?

Answer 22

The amount you can deduct for a contribution of ordinary income property is its fair market value minus the amount that would be ordinary income or short-term capital gain if you sold the property for its fair market value. Generally, this rule limits the deduction to your basis in the property.

Property is ordinary income property if you would have recognized ordinary income or short-term capital gain had you sold it at fair market value on the date it was contributed.

EXAMPLES

• Examples of ordinary income property are inventory, works of art created by the donor, manuscripts prepared by the donor, and capital assets (defined later, under Capital Gain Property) held 1 year or less.

Question 23

You donate stock you held for 5 months to your church. The fair market value of the stock on the day you donate it is $1,000, but you paid only $800 (your basis).

Answer 23

Because the $200 of appreciation would be short-term capital gain if you sold the stock, your deduction is limited to $800 (fair market value minus the appreciation).

Question 24

When shouldn’t you reduce your charitable contribution by the amount of ordinary income or capital gain income?

Answer 24

Don’t reduce your charitable contribution if you include the ordinary or capital gain income in your gross income in the same year as the contribution.

Question 25

When is property considered Capital Gain Property?

Answer 25

General Deduction = When figuring your deduction for a contribution of capital gain property, you generally can use the fair market value of the property.

Property is capital gain property if you would have recognized long-term capital gain had you sold it at fair market value on the date of the contribution. Capital gain property includes capital assets held more than 1 year

Capital Assets:

1. include most items of property you own and use for personal purposes or investment
2. stocks, bonds, jewelry, coin or stamp collections, and cars or furniture used for personal purposes
3. For purposes of figuring your charitable contribution, capital assets also include certain real property and depreciable property used in your trade or business and, generally, held more than 1 year
   4.

Question 26

Property used in a trade or business.

Answer 26

Property used in a trade or business is considered ordinary income property to the extent of any gain that would have been treated as ordinary income because of depreciation had the property been sold at its fair market value at the time of contribution. See chapter 3 of Pub. 544, Sales and Other Dispositions of Assets, for the kinds of property to which this rule applies.

Question 27

While the General Rule for a contribution of capital gain property is, you can deduct the fmv of the property, what are the exceptions?

What do you generally reduce the capital gain property to?

Answer 27

However, in certain situations, you must reduce the fair market value by any amount that would have been long-term capital gain if you had sold the property for its fair market value.

Generally, this means reducing the fair market value to the property’s cost or other basis. You must do this if:

1.

Question 28

If your total contributions for the year are ____ or less of your AGI, you don’t need to worry about limits on deduction

Answer 28

20%

Question 29

What are the four limits in effect for 2019 charitable contributions?

What should immediately come to mind when you are in excess of limits?

Answer 29

1. 20%
2. 30%
3. 50%
4. 60%
5. 100%

Carryover Rules

Question 30

Out-of-pocket expenses?

amounts you spend on behalf of a private nonoperating foundation?

Answer 30

Amounts you spend performing services for a charitable organization may be deductible as a contribution to a qualified organization. If so, your deduction is subject to the limit applicable to donations to that organization. For example, the 30% limit applies to amounts you spend on behalf of a private nonoperating foundation.

Question 31

How many categories of qualified organizations are there for charitable purposes?

Answer 31

First category = 50% limit organizations

The second Category = any type of “qualified organization” that isn’t in the first category.

1. 50% Category Organiztions:
   
   1. . Churches and conventions or associations of churches.
   2. Educational organizations with a regular faculty and curriculum that normally have a regularly enrolled student body attending classes on site.
   3. Hospitals and certain medical research organizations associated with these hospitals.
   4. Organizations that are operated only to receive, hold, invest, and administer property and to make expenditures to or for the benefit of state and municipal colleges and universities and that normally receive substantial support from the United States or any state or their political subdivisions, or from the general public.
   5. The United States or any state, the District of Columbia, a U.S. possession (including Puerto Rico), a political subdivision of a state or U.S. possession, or an Indian tribal government or any of its subdivisions that perform substantial government functions.
   6. Publicly supported charities defined earlier under Qualified Conservation Contribution.
   7. Organizations that may not qualify as “publicly supported” but that meet other tests showing they respond to the needs of the general public, not a limited number of donors or other persons. They must normally receive more than one-third of their support either from organizations described in (1) through (6), or from persons other than “disqualified persons.”
   8. Most organizations operated or controlled by, and operated for the benefit of, those organizations described in (1) through (7).
   9. Private operating foundations.
   10. Private nonoperating foundations that make qualifying distributions of 100% of contributions within 21/2 months following the year they receive the contribution. A deduction for charitable contributions to any of these private nonoperating foundations must be supported by evidence from the foundation confirming it made the qualifying distributions timely. Attach a copy of this supporting data to your tax return.
   11. A private foundation whose contributions are pooled into a common fund, if the foundation would be described in (8) but for the right of substantial contributors to name the public charities that receive contributions from the fund. The foundation must distribute the common fund’s income within 21/2 months following the tax year in which it was realized and must distribute the corpus not later than 1 year after the donor’s death (or after the death of the donor’s surviving spouse if the spouse can name the recipients of the corpus).

Question 32

What do the limits that apply to a contribution depend on?

Answer 32

1. The limit that applies to a contribution depends on:
   
   1. the type of property you give and
   2. which category of qualified organization you give it to
2. The amount of a contribution you can deduct generally is limited to a percentage of your adjusted gross income, but may be further reduced if you make contributions that are subject to more than one of the limits discussed in this section.

Question 33

What are the limits based on 100% of adjusted gross income?

Answer 33

Qualified conservation contributuons of farmers and ranchers (if your gross income from the trade or business of farming is more than 50% of your gross income for the year)

If you are a qualified farmer or rancher, your deduction for a qualified conservation contribution (QCC) is limited to:

1. 100% of your adjusted gross income minus your deduction for all other charitable contributions

EXCEPTION = However, if the donated property is used in agriculture or livestock production (or is available for such production), the contribution must be subject to a restriction that the property remain available for such production

Qualified contributions for California wild-fire relief efforts

Question 34

What are the limits based on 60% of AGI

What is the exception?

Answer 34

Cash + 50% qualified organizations

EXCEPTION

1. A 30% limit applies to cash contributions that are “for the use of” the qualified organizations instead of “to” the qualified organization. A contribution is “for the use of” a qualified organization when it is held in a legally enforceable trust for the qualified organization or in a similar legal arrangement. See Contributions to the second category of qualified organizations or “for the use of” any qualified organization, later, under Limits based on 30% of adjusted gross income, for more information

NOTE:

1. Non-cash contributions do not qualify for 60% limit

Question 35

1. You gave your church a $200 cash contribution. Charitable limit?
2. You donated clothing to your church with a fair market value of $200. Charitable limit?

Answer 35

1. The limit based on 60% of adjusted gross income will apply to the cash contribution to the church because it is an organization described earlier under First category of qualified organizations (50% limit organizations) and because the contribution was cash.
2. The limit based on 60% of adjusted gross income doesn’t apply because the contribution is not cash. Instead, a limit based on 50% of adjusted gross income discussed later will apply to the contribution to the church because it is an organization described earlier under First category of qualified organizations (50% limit organizations)

Question 36

What are the limits based on 50% of AGI

Answer 36

Two limits:

1. Noncash contributions to 50% limit organizations:
   
   1. If you make noncash contributions to organizations described earlier under First category of qualified organizations (50% limit organizations), your deduction for the noncash contributions is limited to 50% of your adjusted gross income minus your cash contributions subject to the 60% limit
2. Capital Gain Property Exception to a 30% limit
   
   1. A 30% limit applies to noncash contributions of capital gain property if you figure your deduction using fair market value without reduction for appreciation.
3. Capital Gain Property Election to a 50% limit
   
   1. You may choose the 50% limit for contributions of capital gain property to qualified organizations instead of the 30% limit that would otherwise apply.
   2. If you make this choice, you must reduce the fair market value of the property contributed by the appreciation in value that would have been a long-term capital gain if the property had been sold. This choice applies to all capital gain property contributed to 50% limit organizations during a tax year. It also applies to carryovers of this kind of contribution from an earlier tax year. For details, see Carryover of capital gain property, later. You must make the choice on your original return or on an amended return filed by the due date for filing the original return.

Question 37

What are the limits based on 30% of AGI

Answer 37

Private operating foundations are

1. private foundations that primarily operate their own charitable programs, although some also make grants. Private operating foundation is a legal classification under the Internal Revenue Code, and these foundations must follow many of the private foundation rules.
2. Unlike private foundations that are not operating, a private operating foundation is required to spend a certain portion of its assets each year on charitable activities.
3. By contrast, private non-operating foundations are required to pay out 5 percent or more of their assets each year in grants.

The 30% limit for capital gain property contributions to a 50% limit organization is separate from the 30% limit that applies to your other contributions

These are three 30% limits that may apply to your contributions.

1. The 30% limit for capital gain property contributions to a 50% limit organization is separate from the 30% limit that applies to your other contributions (e.g. cash to a non-50% qualified organization
2. Both are separately reduced by contributions made to a 50% organization, but the amount allowed after applying one of the 30% limits doesn’t reduce the amount allowed after applying the other 30% limit.
3. However, as a result of applying the separate limits, the total contributions subject to a 30% limit will never be more than 50% of your adjusted gross income.

Question 38

Facts:

1. Your adjusted gross income is $50,000.
2. During the year, you gave capital gain property with a fair market value of $15,000 to a 50% organization
3. You don’t choose to reduce the property’s fair market value by its appreciation in value. You also gave $10,000 cash to a qualified organization that is a 30% organization
4. What are the limits?

Answer 38

Answer:

1. The $15,000 contribution of capital gain property is subject to one 30% limit
2. the $10,000 cash contribution is subject to the other 30% limit

Actual Deductions:

1. The $10,000 cash contribution is fully deductible because the contribution is not more than the smaller of (i) 30% of your adjusted gross income ($15,000) and (ii) 50% of your adjusted gross income minus all contributions to a 50% organization ($25,000 - $15,000 = $10,000).
2. The $15,000 is also fully deductible because the contribution is not more than 30% of your adjusted gross income minus all contributions to a 50% organization subject to the 60% or 50% limit (other than qualified conservation contributions) ($25,000 - $10,000 = $15,000)
3. Neither amount is reduced by the other, so the total deductible contribution is $25,000 (which is also not more than $50,000 of your adjusted gross income).

Question 39

What are the circumstances for 20% of adjusted gross income?

Answer 39

If you make:

1. noncash contributions of capital gain property during the year (1) to a non-50% organization or
2. “for the use of” any qualified organization, your deduction for those contributions is limited to 20% of your adjusted gross income or, if less, the smallest of the following:
   
   1. 30% of your adjusted gross income minus all your contributions that are subject to a limit based on 30% of adjusted gross income.
   2. 30% of your adjusted gross income minus all your capital gain contributions that are subject to the limit based on 30% of adjusted gross income.
   3. 50% of your adjusted gross income minus all contributions subject to the limits based on 60%, 50%, and 30% of adjusted gross income (other than qualified conservation contributions).

Question 40

A contribution is “for the use of” a qualified organization when…

Answer 40

A contribution is “for the use of” a qualified organization when it is held in a legally enforceable trust for the qualified organization or in a similar legal arrangement.

Question 41

If your contributions are subject to more than one of the limits discussed earlier, use the following steps to figure the amount of your contributions that you can deduct.

Answer 41

1. Cash Contributions to 50% limit organization = Cash contributions subject to the limit based on 60% of adjusted gross income (AGI). Deduct the contributions that don’t exceed 60% of your adjusted gross income.
2. Non-Cash Contributions based on 50% of AGI = Noncash contributions (other than qualified conservation contributions) subject to the limit based on 50% of AGI. Deduct the contributions that don’t exceed 50% of your AGI minus your cash contributions to a 50% limit organization.
3. Cash AND Non-Cash Contributions based on 30% of AGI = Cash and noncash contributions (other than capital gain property) subject to the limit based on 30% of AGI. Deduct the contributions that don’t exceed the smaller of:
   
   1. 30% of your AGI, or
   2. 50% of your AGI minus your contributions to a 50% limit organization (other than contributions subject to a limit based on 100% of AGI or qualified conservation contributions), including capital gain property subject to the limit based on 30% of AGI.
4. Contributions of capital gain property subject to the limit based on 30% of AGI. Deduct the contributions that don’t exceed the smaller of:
   
   1. 30% of your AGI, or
   2. 50% of your AGI minus your contributions subject to the limits based on 60% or 50% of AGI (other than qualified conservation contributions).
5. Contributions of capital gain property subject to the limit based on 20% of AGI. Deduct the contributions that don’t exceed the smaller of:
   
   1. 20% of your AGI,
   2. 30% of your AGI minus your contributions of capital gain property subject to the limit based on 30% of AGI,
   3. 30% of your AGI minus your other contributions subject to the limit based on 30% of AGI, or
   4. 50% of your AGI minus your contributions subject to the limits based on 60%, 50%, and 30% of AGI (other than qualified conservation contributions).
6. Qualified conservation contributions subject to the limit based on 50% of AGI. Deduct the contributions that don’t exceed 50% of your AGI minus any deductible contributions figured in (1) through (5).
7. Qualified conservation contributions subject to the limit based on 100% of AGI. Deduct the contributions that don’t exceed 100% of your AGI minus any deductible contributions figured in (1) through (6).
8. Qualified contributions for California wildfire relief efforts subject to the limit based on 100% of AGI. Deduct the contributions that don’t exceed 100% of your AGI minus all your other deductible contributions

Question 42

Example -

1. Your adjusted gross income is $50,000.
2. In March, you gave your church $2,000 cash and land with a fair market value of $28,000 and a basis of $22,000.
   
   1. You held the land for investment purposes for more than 1 year. You don’t make the capital gain property election for this year.
   2. Therefore, the amount of your charitable contribution for the land would be its fair market value of $28,000.
3. You also gave $5,000 cash to a private nonoperating foundation to which the 30% limit applies.

Answer 42

1. The $2,000 cash donated to the church is considered first and is fully deductible.
2. Your contribution to the private nonoperating foundation is considered next.
   
   1. Because the total of your cash contribution of $2,000 and your capital gain property of $28,000 to a 50% limit organization ($30,000) is more than $25,000 (50% of $50,000), your full contribution to the private nonoperating foundation isn’t deductible for the year.
   2. It can be carried over to later years.
   3. Your deduction for the land is limited to $15,000 (30% × $50,000). The unused part of the contribution ($13,000) can be carried over.
3. For this year, your deduction is limited to $17,000 ($2,000 + $15,000).

Question 43

You may choose the 50% limit for contributions of capital gain property to qualified organizations described earlier under First category of qualified organizations (50% limit organizations) instead of the 30% limit that would otherwise apply.

Answer 43

If you make this choice, you must reduce the fair market value of the property contributed by the appreciation in value that would have been long-term capital gain if the property had been sold.

This choice applies to all capital gain property contributed to 50% limit organizations during a tax year. It also applies to carryovers of this kind of contribution from an earlier tax year. For details, see Carryover of capital gain property, later.

You must make the choice on your original return or on an amended return filed by the due date for filing the original return.

Question 44

Your adjusted gross income is $50,000. In March, you gave your church $2,000 cash and land with a fair market value of $28,000 and a basis of $22,000. You held the land for investment purposes for more than 1 year. You also gave $5,000 cash to a private nonoperating foundation to which the 30% limit applies.

If you choose to have the 50% limit apply to the land (the 30% capital gain property) given to your church…

Answer 44

you must reduce the fair market value of the property by the appreciation in value.

Therefore, the amount of your charitable contribution for the land would be its basis to you of $22,000. You add this amount to the $2,000 cash contributed to the church. You can now deduct $1,000 of the amount donated to the private nonoperating foundation because the total of your contributions of cash ($2,000) and capital gain property ($22,000) to 50% limit organizations is $1,000 less than the limit based on 50% of adjusted gross income. Your total deduction for the year is $25,000 ($2,000 cash to your church, $22,000 for property donated to your church, and $1,000 cash to the private nonoperating foundation). You can carry over to later years the part of your contribution to the private nonoperating foundation that you couldn’t deduct ($4,000)

Question 45

Carryover Limit

1. You may be able to deduct the excess in each of the next ___ years until it is used up, but not beyond that time?

Exception

1. What is the exception for and how many years are allowed to carry forward?

Answer 45

1. 5 years
2. Except for qualified conservation contributions,
3. A carryover of a qualified conservation contribution can be carried forward for 15 years

Question 46

Contributions you carry over are subject to the _____ percentage limits in the year to which they are carried.

Answer 46

same

For each category of contributions, you deduct carryover contributions only after deducting all allowable contributions in that category for the current year. If you have carryovers from 2 or more prior years, use the carryover from the earlier year first.

A carryover of a contribution to a 50% limit organization must be used before contributions in the current year to organizations other than 50% limit organizations

Question 47

Example Carryover

1. Last year, you made cash contributions of $11,000 to 50% limit organizations. Because of the limit based on 50% of adjusted gross income, you deducted only $10,000 and carried over $1,000 to this year.
2. This year, your adjusted gross income is $20,000 and you made cash contributions of $9,500 to 50% limit organizations, to which the limit based on 60% of adjusted gross income applies.

Answer 47

You can deduct this year’s cash contribution in full because $9,500 is less than $12,000 (60% of $20,000).

If your carryover is subject to the limit based on 50% of your adjusted gross income, you can deduct $500 of the $1,000 you carried over, which is 50% of your adjusted gross income minus your cash contributions to a 50% limit organization ($10,000 - $9,500 = $500). You can carry over the $500 balance of your carryover from last year to the next year.

Question 48

This year, your adjusted gross income is $24,000.

You make cash contributions of $6,000 to which the 60% limit applies and $3,000 to which the 30% limit applies (made to a non-50% organization).

You have a contribution carryover from last year of $5,000 for capital gain property contributed to

• a 50% limit organization and
• subject to the special 30% limit for contributions of capital gain property.

Answer 48

1. Your cash contributions of $6,000 is fully deductible because it is less than $14,400 (which is 60% of your adjusted gross income).
2. The deduction for your 30% limit contributions of $3,000 is limited to $1,000. This is the lesser of:
   
   1. $7,200 (30% of $24,000), or
   2. $1,000 ($12,000 minus $11,000).
3. (The $12,000 amount is 50% of $24,000, your adjusted gross income. The $11,000 amount is the sum of your current and carryover contributions to 50% limit organizations, $6,000 + $5,000.)
4. The deduction for your $5,000 carryover is subject to the special 30% limit for contributions of capital gain property. This means it is limited to the smaller of:
   
   1. $7,200 (your 30% limit), or
   2. $6,000 ($12,000, your 50% limit, minus $6,000, the amount of your cash contributions to 50% limit organizations this year).
5. Because your $5,000 carryover is less than both $7,200 and $6,000, you can deduct it in full.
6. Your deduction is $12,000 ($6,000 + $1,000 + $5,000). You carry over the $2,000 balance of your 30% limit contributions for this year to next year.

Question 49

If you carry over contributions of capital gain property subject to the special 30% limit and you choose in the next year to use the 50% limit and take appreciation into account, you must refigure the carryover…

EXAMPLE

Last year, your adjusted gross income was $50,000 and you contributed capital gain property valued at $27,000 to a 50% limit organization and didn’t choose to use the 50% limit. Your basis in the property was $20,000. Your deduction was limited to $15,000 (30% of $50,000), and you carried over $12,000. This year, your adjusted gross income is $60,000 and you contribute capital gain property valued at $25,000 to a 50% limit organization. Your basis in the property is $24,000 and you choose to use the 50% limit.

Answer 49

Reduce the fair market value of the property by the appreciation and reduce that result by the amount actually deducted in the previous year.

1. You must refigure your carryover as if you had taken appreciation into account last year as well as this year.
2. Because the amount of your contribution last year would have been $20,000 (the property’s basis) instead of the $15,000 you actually deducted, your refigured carryover is $5,000 ($20,000 − $15,000).
3. Your total deduction this year is $29,000 (your $24,000 current contribution plus your $5,000 carryover).

Question 50

Special rules exist for computing carryovers if you:

Answer 50

1. Are married in some years but not others,
2. Have different spouses in different years,
3. Change from a separate return to a joint return in a later year,
4. Change from a joint return to a separate return in a later year,
5. Have a net operating loss,
6. Claim the standard deduction in a carryover year,
7. Become a widow or widower.

Because of their complexity and the limited number of taxpayers to whom these additional rules apply, they aren’t discussed in this publication. If you need to figure a carryover and you are in one of these situations, you may want to consult with a tax practitioner.

Question 51

Private vs. Public Charity

Answer 51

1. The distinction between public charities and private foundations is a matter of federal tax law.
2. Public charities, unlike private foundations, are heavily supported by the public. For this reason, public charities are more subject to public scrutiny, which can help ensure adherence to appropriate standards of conduct in the absence of the more strict rules and regulations governing private foundations.

Key Differences

1. Since 1969, private foundations have been subject to stricter and more extensive federal rules than public charities, including strict prohibitions on self-dealing, and limits on the amount of stock they can hold in any one company. Examples of the various regulated private foundation activities include:
   
   1. financial transactions between the foundation and its largest contributors, officers, and other insiders
   2. amounts paid out toward operating costs, grants, and charitable programs
   3. reasonableness of the types and amounts of expenses incurred to operate the foundation
   4. compensation of foundation staff and board members
   5. business holdings of the foundation
   6. engaging in overly risky investments with charitable assets
   7. grants or other payments to individuals, other private foundations, certain kinds of charities, and organizations that are not charities