Problem 3-52 (LO. 9)

Each year, Tom and Cindy Bates (who file married-filing jointly) report itemized deductions of $10,000, including an annual $4,000 pledge payment to their church. Upon the advice of a friend, they do the following: In early January 2017, they pay their 2016 pledge; during 2017, they pay the 2017 pledge; and in late December 2017, they prepay their 2018 pledge.

a. What are the Bateses trying to accomplish? .

b. What would the Bates' total itemized deductions be if all three church pledge payments were made in 2017? Assume that the itemized deductions of $10,000 already included one year of the church pledge payments. $

What will be the Bates' tax saving if their marginal tax bracket is 25% for all three years?

(Assume that the standard deduction amounts for 2017 and 2018 are the same.)

By concentrating their charitable contributions, their tax savings becomes $.

c. Complete a letter to Tom and Cindy Bates (8212 Bridle Court, Reston, VA 20194) summarizing your analysis.

Maloney, Hoffman, Raabe, & Young, CPAs 5191 Natorp Boulevard Mason, OH 45040

November 22, 2017

Mr. and Mrs. Tom Bates 8212 Bridle Court Reston, VA 20194

Dear Mr. and Mrs. Bates:

In response to your inquiry regarding the Federal income tax consequences of consolidating your charitable contributions for 2016, 2017, and 2018 into a single year (2017), here is a brief summary of the outcomes:

As individual taxpayers are presumed to be on the basis, all cash expenditures during a year be evaluated in determining deductibility. In this case, combining the three $4,000 contributions into a single year sense from an income tax perspective.

By combining all three payments in 2017, you will be able to in that year, while in 2016 and 2018.

These $8,000 of additional contributions in 2017 (the $4,000 payments for 2016 and 2018) will mean that you will have of $.

Your tax savings by consolidating these contributions in 2017 will be $.

If I can be of further assistance to you in this matter, please do not hesitate to contact me.

Sincerely,

Heywood R. Floyd Partner