Earl pays $100 to attend a charity theater party. The tickets for this performance normally cost $75. His adjusted gross income is $36,000. How much can Earl deduct as an itemized deduction?
a. Correct. The deduction is limited to Earl”s payment in excess of the value of the ticket, which is $25 ($100 – $75).
b. Incorrect. The deduction is not equal to the value of the ticket, or $75.
c. Incorrect. The deduction is not the amount of Earl”s payment of $100. However, if Earl declines to accept the ticket so the organization can give it to someone else, his full payment is deductible.
d. Incorrect. The 50% of AGI limitation on cash donations, which for Earl is $18,000 (50% of $36,000), is not the amount of the deduction; it is only a limit on the deduction.
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