For the 2025 U.S. federal tax year, an individual itemizes deductions and makes two contributions to a public charity: a cash donation and a donation of appreciated stock held for more than one year. Under IRC Section 170, how do the AGI-based deduction limits differ between the two contributions?
- Both the cash donation and the appreciated stock donation are limited to 30% of AGI, since Section 170 applies a single uniform ceiling to all contributions to public charities
- The appreciated stock donation is limited to 60% of AGI, while the cash donation is limited to 30% of AGI, the reverse of the usual rule
- Neither contribution is subject to any AGI-based percentage limitation as long as the recipient is a public charity
- The cash donation is limited to 60% of AGI, while the deduction for the appreciated long-term capital gain property is limited to 30% of AGI, with any excess in either case eligible for a five-year carryforward
Why D? And why not the others?
Correct answer: D. The cash donation is limited to 60% of AGI, while the deduction for the appreciated long-term capital gain property is limited to 30% of AGI, with any excess in either case eligible for a five-year carryforward
Under IRC Section 170, cash contributions to a public charity are deductible up to 60% of AGI, while contributions of long-term capital gain property, such as appreciated stock held more than one year, are limited to 30% of AGI; in either case, any contribution amount that exceeds the applicable limit for the year is not lost but may be carried forward and deducted for up to five subsequent tax years. The option applying a uniform 30% ceiling to both types of contributions is wrong because cash contributions to public charities receive the more generous 60% ceiling, not the lower rate that applies to appreciated property. The option reversing the two percentages, capping the stock donation at 60% and the cash donation at 30%, is wrong because it inverts the actual assignment; cash always receives the higher percentage limit of the two. The option claiming neither contribution is subject to any percentage limitation is wrong because AGI-based percentage limitations apply even to gifts made to public charities, which in fact receive the most favorable limits available under Section 170, compared to the lower limits that apply to gifts to private foundations.
Source: IRS Publication 526 (2025), Charitable Contributions