Problem $10-36($Algorithmic$)($LO$.6,8)$

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 $$172,600$

$(2)$ Unimproved land held for six years $($$$25,890$ basis$)$ $$172,600$

$(3)$ Blue Corporation stock held for eight months $($$$25,890$ basis$)$ $$172,600$

$(4)$ Gold Corporation stock held for two years $($$$207,120$ basis$)$ $$172,600$

Eleanor has asked you to help her decide which of the potential contributions listed above will be most advantageous tax$-$wise. Evaluate the four alternatives and complete a letter to Eleanor.

Determine the amount of the charitable contribution for each option.

Charitable

Contribution

Cash donation $fill in the blank $1$

$172,600$

Unimproved land held for six years $($$$25,890$ basis$)$ $fill in the blank $2$

$172,600$

Blue Corporation stock held for eight months $($$$25,890$ basis$)$ $fill in the blank $3$

$25,890$

Gold Corporation stock held for two years $($$$207,120$ basis$)$ $fill in the blank $4$

$172,600$

SWFT$,$ LLP

$5191$ Natorp Boulevard

Mason, OH $45040$

December $5,2023$

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 $fill in the blank $5$

$172,600$

charitable contribution deduction. Donation of the Blue Corporation stock will result in only a $fill in the blank $6$

$25,890$

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 $fill in the blank $9$

$172,600$

$.$ If you sell the Gold stock and give the proceeds to United Way, the donation of the proceeds will result in a $fill in the blank $10$

$172,600$

charitable contribution deduction. In addition, sale of the stock will result in a $fill in the blank $11$

long$-$term capital loss. If you have capital gains of $fill in the blank $12$

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 $fill in the blank $13$

of the capital loss this year and carry over the remaining $fill in the blank $14$

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 consulting our firm on this matter. We look forward to serving you in the future.

Sincerely,

Nora Oldham, CPA

Partner