Book Problem 10-36 (Algorithmic) (LO6, 8) In December of each year, Eleanor Young contributes 10% of her gross income to the United Way (a 50% organization). Eleanor, who is in the 24% marginal tax bracket, is considering the following alternatives for satisfying the contribution: Fair Market Value (1) Cash donation $161,800 (2) Unimproved land held for six years (524,270 basis) $161,800 (3) Blue Corporation stock held for eight months ($24,270 basis) $161,800 (4) Gold Corporation stock held for two years ($194,160 basis) $161,800 Eleanor has asked you to help her decide which of the potential contributions listed above will be most advantageous tak wist. Evaluate the four alternatives and complete a letter to Eleanor. Determine the amount of the charitable contribution for each option Charitable Contribution Cash donation 309,000 x Unimproved land held for six years (24.270 basis) 161,800 Blue Corporation stock held for eight months ($24.270 basis) 24,270 Gold Corporation stock held for the years (5194.160 basis) 12,135 x SWFT, LLP 5191 Natorp Boulevard Mason, OH 45040 December 5, 2021 Ms. Eleanor Young 2622 Bayshore Drive Barkley, CA 94709 Dear Young I have evaluated the proposed sternatives for your current year and contribution to the United way. I recommend that you se the Gold Corporation stock and donate the proceed to the United War. The formatives are discussed below Adoration of cash the wimproved land of the Gold stock will retina 161,100 chantable contribution deduction Donation of the Blue Corporation stock wira 24,270 charitable contribution deduction A direct contribution of the Gold Corporation stock it be decision from a tax perspective in that the decline in vedoctible and the amount of the charitable contribution would be 161,000 you set the Goldstock and give the proceeds United War, the donation of the proceeds rutinas 161.000 charitable contribution deduction. In addition, sale of the stock wina 32,360 long-term capit. If you have Catalos 32,360 X or more this yes, you can use their loxis coming your current table income Varens this yea, you can 12.135 X of the call this year and carry over the remaining 3,090 X touto hure SWFT, LLP 5191 Natorp Boulevard Mason, OH 45040 December 5, 2021 Ms. Eleanor Young 2622 Bayshore Drive Berkeley, CA 94709 Dear Ms. Young I have evaluated the proposed alternatives for your current year-end contribution to the United Way. I recommend that you sell the Gold Corporation stock and donate the proceeds to the United Way. The four alternatives are discussed below. A donation of cash, the unimproved land, or the Gold stock will result in a $ 161,800 charitable contribution deduction. Donation of the Blue Corporation stock will result in only as 24,270 charitable contribution deduction A direct contribution of the Gold Corporation stock will be a poor decision from a tax perspective in that the decline in value is not deductible and the amount of the charitable contribution would be s 161,800 If you sell the Gold stock and give the proceeds to United Way, the donation of the proceeds will result in a 161,800 charitable contribution deduction. In addition, sale of the stock will result in a si 32,360 long-term capital loss. If you have capital gains of s 32,360 X or more this year, you can use the entire loss in computing your current taxable income. If you have no capital gains this year, you can deduct 12,135 x of the capital loss this year and carry over the remaining 3,090 X loss to future years, You should make the donation in time for ownership to change hands before the end of the year. Therefore, I recommend that you notify your broker immediately so that there will be no problem in completing the donation on a timely basis. Please let me know if you have any questions or would like to discuss my recommendation and the related analysis. Thank you for comwiting our firm on this matter. We look forward to serving you in the future. Sincerely, Nora Oldham, CPA Partner
