D started a small business to make and sell Christmas tree ornaments.She imported most of the materials from Europe, used real gold, and used some very highly paid workers to assemble the ornaments.Her cost for each ornament was $500.She marketed them at $1,000 apiece and sold none.After Christmas, she marked them down to $475 and sold one.She donated the remaining twenty ornaments to her church.Disregarding any percentage limitation, how much may she deduct for this contribution?
A)$9,000
B)$9,500
C)$10,000
D)$20,000
E)None of the above

Question

Quizplus · Accepted Answer

The deduction for the donation of inventory (the ornaments) to a charity is limited to the lesser of the cost or the fair market value. Since D sold the ornaments for $475 each after Christmas, this price would likely be considered their fair market value. Therefore, she can deduct $475 for each of the 20 ornaments donated, totaling $9,500.

D Started a Small Business to Make and Sell Christmas