Evaluate Income And Deduction Timing Practice Test

Priya is a cash-basis individual who itemizes deductions and is subject to the $10,000 limitation on the itemized deduction for state and local taxes. On December 29, 2026, she has already paid $10,000 of state and local taxes for 2026 and is considering paying an additional $4,000 of state estimated tax on December 31, 2026 versus January 15, 2027. Priya expects $150,000 of wages, $1,100 of interest income, and a $5,000 long-term capital gain if she sells stock in 2026. Based on timing and limitation rules, which timing strategy maximizes tax benefits for the state tax payment?

Rachel is a cash-basis individual and expects $100,000 of wages, $1,000 of interest income, and a $9,000 long-term capital gain if she sells stock. She is considering making a $2,000 contribution to a qualified public charity and can either donate appreciated stock with a $2,000 fair market value (basis $800) on December 31, 2026 or sell the stock on December 31, 2026 and donate $2,000 cash on January 3, 2027. Which timing strategy maximizes tax benefits considering both gain recognition and deduction timing?