Plum Corporation (a C corporation and a computer manufacturer) donated 100 laptop computers to a local university (a qualified educational organization) this year. The computers were constructed by Plum earlier this year, and the university will use the computers for research and research training. Plum's basis in the computers is $35,000, and their fair market value is $120,000. What is Plum's deduction for the contribution of the computers (ignoring the taxable income limitation) ?

Question

Monique Carr

Business

16 February, 03:16

Plum Corporation (a C corporation and a computer manufacturer) donated 100 laptop computers to a local university (a qualified educational organization) this year. The computers were constructed by Plum earlier this year, and the university will use the computers for research and research training. Plum's basis in the computers is $35,000, and their fair market value is $120,000. What is Plum's deduction for the contribution of the computers (ignoring the taxable income limitation) ?

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Nola · Answer 1

Plum's deduction for the contribution of the computers is $70,000

Explanation:

According to the given data the contribution of the computers qualifies for the increased contribution amount available with respect to certain inventory.

Therefore, The contribution amount is equal to the lesser of:

1) $35,000 basis + 50 % * ($120,000 FMV - $35,000 basis) = $ 77,500 (basis + 50 % of the appreciation on the property)

2) $35,000 * 2 = $ 70,000 (twice the property's basis)

Therefore, Plum's deduction for the contribution of the computers is $70,000.