During the year, Ricardo made the following contributions to a qualified public charity:
Cash ...............................................................................$220,000
Stock in Seagull, Inc. (a publicly traded corporation) .......................280,000
Ricardo acquired the stock in Seagull, Inc., as an investment five years ago at a cost of $120,000. Ricardo's AGI is $840,000.
a. What is Ricardo's charitable contribution deduction?
b. How are excess amounts, if any, treated?
c. Ricardo expects his taxable income to vacillate over the next several years, and his ability to claim the remaining charitable contribution deduction in those years is uncertain. Calculate the present value of the tax savings from the charitable contribution if the excess contribution deduction is taken in the third year following the actual contribution or is taken in the fifth year following the contribution. Assume that Ricardo is in the 39.6%, 25%, and 15% tax brackets in the year of contribution, the third year following the contribution, and the fifth year following the contribution, respectively. See Appendix G for the present value factors, and assume a 6% discount rate