CHAPTER 7 PRACTICE QUIZZES

CHAPTER 7 PRACTICE QUIZZES - 1.

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
1. Richard is putting together his files in order to prepare his tax return.  He mentions two additional expenditures he plans to deduct as  charitable contributions. Richard’s church ran a fundraising auction  this year. Richard successfully bid $600 for a bottle of rare wine in the  auction which was valued at $350. He wrote the check out to “San  Fernando Valley Church.” Richard also attended a fundraiser for the  American Heart Association where he bought $300 of raffle tickets.  He wrote his check out to “American Heart Association.”  Unfortunately, he did not win any of the prizes. Richard plans to  deduct the $900. Please comment on Richard’s planned deductions. Your Answer: <0> While Richard does have bank records supporting payments made to  qualifying charitable organizations, the value of any goods or  services received by the taxpayer from the charity must reduce the  value of any contribution made to the charity. In the case of the  church auction, Richard received a bottle of wine valued at $350.  Therefore, regardless of what his check says, he can only deduct  $250, the excess of the amount paid over the value of the item  received. With respect to the $300 of raffle tickets, in spite of writing  the check out to a charity, the purchase of raffle tickets from any  party is considered gambling. Richard has incurred gambling losses,  not a charitable contribution. Richard should also be aware that in the  case of contributions of $250 or more, the charity must furnish a  separate statement to the taxpayer indicating the amount of the  contribution and the value of any goods or services provided to the  taxpayer. If Richard were to persist in taking such a deduction, upon  audit the contribution would be disallowed and penalties most likely  imposed.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 03/24/2012 for the course ACC 314 taught by Professor Dee during the Spring '12 term at Gardner-Webb.

Page1 / 6

CHAPTER 7 PRACTICE QUIZZES - 1.

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online