Quiz: How many charitable giving questions can you answer correctly?
Question 1: What deduction can you take when gifting property to charity?
- a. The purchase value of the property
- b. The property’s fair market value
- c. The value of the property minus depreciation
Answer: b.
The allowable deduction is generally equal to the fair market value of the property. Under certain circumstances, the deduction for a gift of property must be reduced. The amount that may be deducted in any one year is subject to certain income percentage limits that hinge on several factors, including on the type of property, the type of charity and whether the contribution is made “to” the charity of “for the use of” the charity.
Question 2: Who has the burden of proof in establishing the fair market value of donated property?
- a. The taxpayer
- b. The appraiser
- c. The charity
Answer: a.
The taxpayer has the burden of proof in establishing the fair market value of the property donated.
Question 3: True or False? When a taxpayer donates money or property worth $250 or more, they must obtain a statement disclosing whether the charity provided goods or services in return for the donation.
Answer: True
Question 4: What happens if a taxpayer underpays taxes because of an overvaluation of property donated?
- a. The taxpayer is subject to withholding of 10% AGI for five consecutive years
- b. The taxpayer must adjust for the overvaluation and pay the difference
- c. The taxpayer may be subject to a penalty of 20% of the underpayment attributable to the misstatement
Answer: b.
The taxpayer must adjust for the overvaluation and pay the difference.
Question 5: When is the deduction for a charitable gift taken?
- a. The year in which the charity accepts and uses the donation
- b. The year in which the donation is made
- c. One calendar year after the donation was made
Answer: b.
Question 6: If the sale of the appreciated personal property would result in long-term capital gain, a taxpayer is entitled to deduct the property’s full fair market value up to what percent of the individual’s adjusted gross income?
- a. 15%
- b. 20%
- c. 30%
Answer: c.
Question 7: What is the term used to describe property sold to a charity for less than its fair market value?
- a. Bargain sale
- b. LFMV sale
- c. After-market sale
Answer: a.
If property is sold to a charity as a bargain sale, the donor must first determine whether a charitable deduction is allowable.
Source: ThinkAdvisor
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