Plum Corporation (a C corporation and a computer manufacturer) donated 100 laptop computers to a local university (a qualified educational organization) in the current 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 $7,000, and their fair market value is $24,000.

What is Plum’s deduction for the contribution of the computers (ignoring the taxable income limitation)?

Question

Plum Corporation (a C corporation and a computer manufacturer) donated 100 laptop computers to a local university (a qualified educational organization) in the current 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 $7,000, and their fair market value is $24,000.

What is Plum’s deduction for the contribution of the computers (ignoring the taxable income limitation)?

BlackTom AI · Accepted Answer

Question restatement: Plum Corporation donates 100 laptop computers to a qualified educational organization. Basis to Plum is $7,000; fair market value is $24,000. The deduction is to be determined ignoring the taxable income limitation.
Option 1: $15,500. This result aligns with the special rule for corporations donating appreciated property: the deduction equals the adjusted basis of the property plus one-half of the appreciation (i.e., 7,000 + 0.5*(24,000 − 7,000) = 7,000 + 8,500 = 15,500). The reasoning is that when a C corporation donates appreciated property to a public charity, and the property would have triggered long-term capital gain if sold by the donor, the deduction is not the full fair market value but rather the basis plus half the appreciation, provided the charity uses the property in its exempt function.
Option 2: $35,000. This would exceed the fair market value of the property, which is $24,000, so it cannot be correct. Deductions cannot surpass FMV for a donation of property.
Option 3: $14,000. This amount might correspond to the basis itself ($7,000) plus $7,000 of some assumed portion of appreciation, but it does not reflect the statutory rule of adding half of the appreciation. It underestimates the intended half-valuation treatment and is inconsistent with the standard calculation for appreciated property donated by a corporation.
Option 4: $70,000. This figure is far above FMV and basal limits for charitable contributions; it would be impossibly high and is not anchored in any applicable rule for corporate donations of appreciated property.
In summary, the correct approach recognizes that the deduction for a corporate donation of appreciated property to a public charity equals the adjusted basis plus one-half of the appreciation, yielding 7,000 + 8,500 = 15,500, which corresponds to Option 1. The other options violate FMV constraints or misapply the rule for calculating the deduction on appreciated property.

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