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For 2018, Bermuda Corporation had $400,000 of income from operations and made charitable contributions of $70,000....

For 2018, Bermuda Corporation had $400,000 of income from operations and made charitable contributions of $70,000. For 2019, Bermuda Corporation had $600,000 of income from operations and made charitable contributions of $50,000. How much can Bermuda Corporation deduct for charitable contributions for 2018 and 2019? What happens to any remaining contributions?

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Answer #1

Deductible charitable contribution 2018

Charitable contribution deduction are limited upto 10% of income

So in 2018 Charitable contribution is limited to $400,000 x 10% =$40,000

The balance $30,000 (ie. $70,000 - $40,000) can be carried forward upto 5 years.

Deductible charitable contribution 2019

Charitable contribution deduction are limited upto 10% of income

So in 2019 Charitable contribution is limited to $600,000 x 10% =$60,000

Charitable contribution during period is $50,000 so it can include balance $10,000 from previous year carried forward charitable contribution.

Balance from 2018 = $30,000 - $10,000 = $20,000

What happens to any remaining contributions?

The remaining contributions of $ 20,000 can be further carried forward for remianing period. This is calulated as 5 years starting from 2018.

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