Zircon Corporation donated scientific property worth $350,000 to City University (a qualified charitable organization)to be used in research.The basis of the property was $100,000,and Zircon had held it for ten months as inventory.Zircon Corporation may deduct $225,000 as a charitable contribution (ignoring the taxable income limitation).

Question

Quizplus · Accepted Answer

The scientific property is ordinary income property but it qualifies for the increased deduction amount available for certain corporate contributions of inventory. As such,the amount of the deduction is equal to the lesser of (1)the sum of inventory's basis plus 50% of the appreciation on the property [$225,000 = $100,000 + 50%($350,000 - $100,000)] or (2)twice the basis [$200,000 = $100,000 × 2]. In this case,the ceiling applies,and the deduction amount is $200,000.

Zircon Corporation Donated Scientific Property Worth $350,000 to City University