🎯Charitable Contributions: 24 MCQs

Responses

1. 

   Vinny D 26 October 2024

   In Question #5, the explanation states “investment or personal-use assets with values less than basis are considered ordinary income property.”.

   Can you please explain, for example, if you held stock for more than 1 year, but it is worth less than your basis, you’d categorize that as ordinary income?

   1. 

      Maroun, CPA 28 October 2024

      Hello Vinny,

      When capital gain property, such as stock or real estate, has been held for more than one year and appreciated in value, it qualifies as long-term capital gain (LTCG) property. However, if the fair market value (FMV) of the stock is less than its adjusted basis, it will not retain the capital gain treatment. Instead, it is treated as ordinary income property for charitable deduction purposes.

      For example, if you bought stock for $10,000 two years ago and its FMV is $6,000 at the time of donation, your deduction would be $6,000 limited to 50% of AGI, rather than the 30% AGI limit that applies to appreciated capital gain property.

      I hope this helps!

2. 

   Joon Kim 11 January 2026

   Why is that when you contribute to both cash and property as the same time, the deduction for the $12,000 property contribution is limited to the lesser of 30% of AGI or 50% of AGI minus the amount of cash contributions made in the same year? Does it make a difference when it is just one type vs. multiple type of contribution? For I thought for the property, 30% x $33,000 = $9,900, and the rest of $12000- $9900 will be carried over.

   1. 

      Maroun, CPA 13 January 2026

      Hello Joon,

      The key reason for this result is the Ordering Rule: The IRS requires you to deduct Cash first.

      When you contribute both cash and property, the deduction for the property is limited to the lesser of:
      1. The normal property limit (30% of AGI).
      2. The “General Limit” (50% of AGI) minus the cash you already contributed.

      Even though cash has a 60% limit for itself, it “uses up” the space available for property under the general 50% limit.

      Step 1 (The Space Available): 50% of AGI ($16,500) minus Cash Contributed ($17,000) = $0 (No space left).
      Step 2 (The Comparison): Compare the space left ($0) vs. the normal 30% limit ($9,900). You must take the lower number.

      Because the cash donation was so high, it effectively “crowded out” the property deduction for the current year, forcing the full $12,000 to be carried forward.

      I hope this simplifies the logic for you!