TCOs 4 and 5 Grocer Services Corporation a calendaryear taxp

TCOs 4 and 5) Grocer Services Corporation (a calendar-year taxpayer), a wholesale distributor of food, made the following donations to qualified charitable organizations during the year:
 

Adjusted Basis

Fair Market Value

Food (held as inventory) donated to the Ohio Children\'s Shelter

$3,500

$8,000

Passenger van to Ohio Children\'s Shelter, to be used to transport children to school

$7,500

$7,100

Stock in Acme Corporation acquired 7 months ago and held as an investment, donated to Southwest University

$4,000

$6,200

How much qualifies for the charitable contribution deduction?

$15,000

$16,850

$17,250

$19,450

None of the above

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Solution

Since Grocer Services is a corporation and the inventory exception is met, one-half of the appreciation on the food may be claimed, or $2250 [1/2 of ($8,000 – $3,500)]. Therefore, $5750 ($3,500 + $2250 appreciation) is allowed as a deduction. Because the Acme stock is short-term capital gain property and not tangible personalty, the deduction is not based on fair market value ($7100). The deduction for the delivery van, which is not a capital asset, is limited to the lesser of adjusted basis or fair market value ($7100). Thus, $5750 + $7100 + $7100 = $16,850

Answer isB)$16850