Plum Corporation (a C corporation and a computer manufacturer) donated 100 laptop computers to a local university (a qualified educational organization) this 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 $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)?

$70,000

Explanation:

Solution

Recall that:

Plum's basis in the computers is= $35,000

The fair market value is = $120,000.

Now,

We find the deduction for plum's corporation towards the contribution of computers.

Thus,

The donation of the computers allows for the increased amount  contribution at hand with respect to certain inventory. The contribution amount is equal to the lesser of the following:

So,

35000 basis + 50 % * ( 120000 FMV - 35000 basis ) = $ 77500 ( basis + 50 % of the appreciation on the property )

Then

35000 * 2 = $ 70000 ( twice the property's basis )

Hence, Plum’s deduction for the contribution of the computers is 70000.

c is the correct answer.