Question

Determine the deductible charitable contribution in each of the following instances.

Charitable contribution of $2,800 and taxable income before charitable contribution of $46,000.

Charitable contribution of $5,600 and taxable income before charitable contribution of $46,000.

Charitable contribution of $3,300 and taxable income before charitable contribution of $46,000. Taxable income includes a net operating loss carryforward of $4,000.

Charitable contribution of $3,300 and taxable income before charitable contribution of $37,600. Taxable income includes a capital loss carryback of $4,000.

Answer 1

Solution:

Deductible Charitable contribution = Lower of 10% of taxable income before charitable contribution OR actual

a). Deductible Charitable contribution = Lower of 10% of 46,000 = $4,600 OR $2,800

Deductible Charitable contribution = $2,800

.

b). Deductible Charitable contribution = Lower of 10% of 46,000 = $4,600 OR $5,600

Deductible Charitable contribution = $4,600

.

c). Non operating loss carry forwards are included in the net income to determine the limitation.

so the taxable income = $46,000

Deductible Charitable contribution = Lower of 10% of 46,000 = $4,600 OR $3,300

Deductible Charitable contribution = $3,300

.

d). Capital loss of $4,000 are to be carry back

so the proper net income figure for the 10% limitation = $37,600 + $4,000 = $41,600

Deductible Charitable contribution = Lower of 10% of 41,600 = $4,160 OR $3,300

Deductible Charitable contribution = $3,300