In the current year, Plum Corporation, a computer manufacturer, donated 100 laptop computers to a local university (a qualified educational organization). 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)?
a. $35,000
b. $70,000
c. $77,500
d. $85,000
e. $120,000
b
RATIONALE: The contribution of computers qualifies for the increased contribution amount available with respect to certain inventory. The contribution amount is equal to the lesser of (1) the sum of the property's basis plus 50% of the appreciation on the property [$77,500 = $35,000 basis + 0.5($120,000 fair market value – $35,000 basis)] or (2) twice the property's basis ($70,000 = 2 × $35,000 basis). Thus, Plum's deduction for the charitable contribution of the inventory is $70,000.
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