In addition, sale of the stock will result in a $160,000 long-term capital loss. If Jay Corporation
had capital gains of at least $160,000 and paid corporate income tax in the past three years, the
entire loss can be carried back and Jay will receive tax refunds for the carryback years. If Jay
Corporation had no capital gains in the carryback years, the capital loss can be carried forward
and offset against capital gains of the corporation for up to five years.
Jay Corporation should make the donation in time for the ownership to change hands before the
end of the year. Therefore, I recommend that you notify your broker immediately so there will be
no problem in completing the donation on a timely basis.
I will be pleased to discuss my recommendation in further detail if you wish. Please call me if you
have questions. Thank you for consulting my firm on this matter. We look forward to serving you
in the future.
Sincerely,
Richard Stinson, CPA
Note to instructor
: The land and stock are “unrelated use property” but they are not “tangible
personal property.”
50.
Gray Corporation should defer the gift of the land until 2015. This would allow Gray to fully
deduct in 2014 the carryover contribution amount of $75,000. If, instead, Gray gifted the land in
2014, the corporation would lose any otherwise allowable deduction as to the $75,000 carryover
amount. This occurs because current year gifts are applied against the taxable income limitation
before application of any carryover amounts. Thus, the taxable income limitation for 2014 would
be completely exhausted by the gift of land in 2014. Since 2014 represents the fifth and last year
of the carryover period, a gift of the land in 2014 precludes any deduction for the $75,000. A gift
of appreciated land held for more than one year as an investment results in a charitable deduction
equal to the land’s fair market value (subject to the taxable income limitation).
Assuming a gift of the land in 2015
2014 taxable income limitation: 10% × $1 million = $100,000.
2014 charitable contribution deduction: $75,000 (carryover from 2009 gift).
2015 taxable income limitation: 10% × 1.2 million = $120,000.
2015 charitable contribution deduction: $120,000 (gift of land; excess contribution of $130,000 is
carried forward for up to 5 years).
Assuming a gift of the land in 2014
2014 taxable income limitation: 10% × $1 million = $100,000.
2014 charitable contribution deduction: $100,000 (gift of land; excess contribution of $150,000 is
carried forward for up to 5 years). Carryover from 2009 gift ($75,000) disappears, as 2014
is the last year of the carryover period.
2015 taxable income limitation: 10% × 1.2 million = $120,000.
2015 charitable contribution deduction: $120,000 (carryover from 2014 gift; remaining $30,000
of carryover from 2014 gift carries over to 2016).
51.
Hoffman, Raabe, Maloney, Young, & Smith, CPAs
5191 Natorp Boulevard
Mason, OH 45040
December 17, 2014
Mr. Dan Simms, President
Simms Corporation
1121 Madison Street
Seattle, WA 98121
Dear Mr. Simms:
On December 12 you asked me to advise you on the timing of a contribution by Simms
Corporation to the University of Washington. My calculations show that the corporation will
maximize its tax savings by making the contribution in 2014.
