Strategies for Non-Cash Charitable Contribution. Tax Compliance and Planning TCP CPA exa,

In this video, I discuss non-cash charitable contribution such as inventory, investment Secuities and property plant and equipment as covered on the CPA exam TCP section.
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The provided text outlines various rules and considerations for tax deductions related to charitable donations in the United States, as per the Internal Revenue Service (IRS) regulations. Here's a simplified explanation:
Qualified Charity: To be eligible for a tax deduction, donations must be made to a charity recognized by the IRS under Section 501(c)(3). This includes both public charities and private foundations.
Donation of Ordinary Income Property:
This refers to items like inventory, assets held for less than a year, or assets that have lost value.
The tax deduction is limited to the lesser of the item's adjusted basis (its cost minus depreciation) or its current market value.
Donation of Long-Term Capital Gain (LTCG) Property:
LTCG property includes assets held for over a year that have appreciated in value.
The deduction for such donations is based on the item's current market value.
Tangible Personal Property for Unrelated Use:
If LTCG property (like art or collectibles) is used by the charity for a purpose unrelated to its charitable mission (like being sold), the deduction is limited to the property's adjusted basis, not its current value.
Donation of Qualified Vehicles:
When donating vehicles (cars, trucks, boats, planes), if they are sold by the charity, the deduction rules vary:
If the sale price is over $500, the deduction is the lesser of the sale price or the vehicle's market value at the time of donation.
If the sale price is $500 or less, the deduction is the lesser of $500 or the vehicle's market value at the time of donation.
Overall, these rules are part of tax compliance and planning for charitable donations, ensuring that deductions are calculated correctly based on the type of donation and the use of the donated property by the charitable organization.
When you donate Long-Term Capital Gain (LTCG) property to a charity, the tax deduction you can claim is based on the property's Fair Market Value (FMV) at the time you make the donation. LTCG property refers to assets that have increased in value and that you have held for more than one year. This includes:
Investment Assets: These are assets like stocks, bonds, or real estate that you've invested in, which have appreciated in value over the time you've held them.
Personal-Use Assets: Items like art, jewelry, or a car, which you've used personally and which have increased in value.
Gain in Excess of Ordinary Income Depreciation Recapture: This applies to long-term business-use assets. It refers to the portion of the asset's increase in value that exceeds the amount of depreciation you've claimed for tax purposes.
In essence, if you donate assets that have grown in value and you've owned them for over a year, your tax deduction is equal to their current market value, without the need to consider their original cost or the depreciation.
When you donate tangible personal property (like artwork, furniture, or equipment) to a charity, and the charity uses it for a purpose unrelated to its charitable mission (like selling it), the tax deduction you can claim is limited. In such cases, your deduction isn't based on the item's current market value. Instead, it's based on the item's adjusted basis, which is usually what you originally paid for it, adjusted for factors like depreciation or improvements.
In summary, if you donate a physical item to a charity and the charity doesn't use it to further its charitable work, your tax deduction is limited to the original cost of the item (minus depreciation), not its current market value.
When you donate a vehicle (like a car, truck, boat, or airplane) for personal use to a charity, and the charity then sells it, the rules for your tax deduction are specific and depend on the sale price of the vehicle:
If the Vehicle's Fair Market Value (FMV) is Over $500 at the Time of Donation:
Your deduction is limited to the lesser of two amounts:
The gross proceeds from the charity's sale of the vehicle.
The vehicle's FMV on the date you donated it.
This rule applies assuming the FMV is less than what you originally paid for the vehicle (adjusted basis).
If the Charity Sells the Vehicle for $500 or Less:
Your deduction is limited to the lesser of:
$500.
The vehicle's FMV on the date of your donation.
Again, this is under the assumption that the FMV is less than your adjusted basis in the vehicle.
In summary, if you donate a vehicle to a charity and it sells the vehicle, your tax deduction will depend on the sale price and the vehicle's value at the time of your donation, but it's generally capped at the lower of these values.
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