Question

In year 1 (the current year), LAA Inc. made a charitable donation of $124,500 to the American Red Cross (a qualifying charity). For the year, LAA reported taxable income of $595,000, which included a $124,500 charitable contribution deduction (before limitation), a $67,000 dividends received deduction, and a $13,400 net operating loss carryover from year 0. What is LAA Inc.’s charitable contribution deduction for year 1?

Answer 1

The charitable contribution deduction for the year is limited to 10% of taxable income before any charitable contribution before the divident received deduction and the production activities deduction .But it is determined after deducting the Net Operating Loss.

LAA'S Modified Taxable Income = $ 595000+$124500+$67000+$13400

= $ 799, 900

​ ​LAA'S Charitable Contribution Deduction limit = $ 79990 ( 799900*10%)

The remining   $ 44510 (123500- 79990) is carried over for up to 5 years