Question

In year 1 (the current year), LAA Inc. made a charitable donation of $101,250 to the American Red Cross (a qualifying charity). For the year, LAA reported taxable income of $600,000, which included a $101,250 charitable contribution deduction (before limitation), a $56,000 dividends received deduction, and a $13,700 net operating loss carryover from year 0. What is LAA Inc.’s charitable contribution deduction for year 1?

Answer 1

Solution:-

What is LAA Inc.’s charitable contribution deduction for year 1?

Given information,

LAA reported taxable income = $600,000

Charitable donation to American Red Cross = $101,250

Charitable contribution deduction (before limitation) = $56,000

• Here , already we know the charitable contribution deduction limit is upto 10%.

so,

Modified taxable income = 600,000 + 101,250 + 56,000

= $757,250

Modified taxable income =  $757,250

Charitable contribution deduction = 757,250 * 10%

= $75,725

Charitable contribution deduction =  $75,725   

Remaining donation = 101250 - 75,725

= $25,525

Remaining donation = $25,525