🎥+✏️Corporate Charitable Contribution🟢

Responses

1. 

   James 26 November 2023

   corp taxes lesson 1 topic 6, Charitable income, @15:10. Calculations based on taxable income excluding the charitable deduction. In the example at 1651 wouldn’t the taxable income be increased by the $7000 donation?

   1. 

      Mansour Farhat 3 December 2023

      Hi Jim,

      the 7,000 charitable contribution is not included in the expenses of 120,000.

      I hope this helps.

2. 

   SONNY SINGH 14 December 2024

   Hi Professor,
   I understood Charitable contribution 10% deduction as:
   Business income minus expense but you EXCLUDE dividend which means you do not include,
   $150,000 – $120,000 = $30,000 (i did not included dividend) = taxable income is $30,000 * .10 = $3,000 will be a charitable contribution. Thank s

   1. 

      SONNY SINGH 14 December 2024

      And the $3,000 is a charitable deduction and $4,000 is carried forward. Why are we adding the dividend income (i thought I have to exclude it in order to get taxable income)?

   2. 

      Maroun, CPA 16 December 2024

      Hi Sonny,

      You should exclude the dividends received deduction (DRD), NOT the dividends themselves, when calculating the taxable income for determining the 10% charitable contribution limit.

      For example, if dividends of $10,000 were received and a 50% DRD applies, only $5,000 (the deductible portion) is excluded from taxable income.

      Let me know if this clears things up!

      1. 

         Wendy Vargas 18 April 2025

         I entered the problem in ChatGPT and it gave me $130000 for taxable income. The problem says that DRD is $20,000 not just dividend as stated in your example.

         1. 

            Wendy Vargas 18 April 2025

            Sorry = $30,000 not 130,000

            1. 

               Maroun, CPA 19 April 2025

               Hello Wendy,

               Professor Farhat said in the example that the DRD was already part of the $120,000 expenses. ChatGPT couldn’t figure that out just by copying and pasting the text. The most important thing is to understand why we added the DRD to the taxable income.
               For the charitable contribution limit, you need taxable income before the DRD is applied. You start with revenues of $150,000, subtract the total expenses of $120,000 (which already reflect the DRD) to arrive at $30,000, and then add back the $20,000 DRD to get $50,000. That $50,000 is the income figure used to compute the charitable deduction limitation:
               Taxable Income After the DRD = $150,000 – $120,000 = $30,000
               Taxable Income Before the DRD = $30,000 + $20,000 = $50,000

               I hope this makes sense!

3. 

   Thomas Stedman 23 December 2024

   Hi Professor, in the Eagle Corporation example, why don’t they receive a deduction for FMV? Are not the garments considered a related purpose to the Red Cross mission?

   1. 

      Maroun, CPA 30 December 2024

      Hi Thomas,

      The deduction is not fully based on FMV because the garments are ordinary income property. If Eagle Corporation sold the garments instead of donating them, the $6,000 ($8,000 FMV – $2,500 basis) difference would be taxed as ordinary income. The IRS prevents taxpayers from gaining both a full FMV deduction and avoiding ordinary income tax on such property, which is why the enhanced deduction rules apply.

      Please rewatch the video around minute 12, where Professor Farhat explains in detail how the deductible amount is computed under the ordinary income property exception, and let me know if you need further clarification!

4. 

   Wendy Vargas 18 April 2025

   How would you know if an organization used the donation for unrelated purposes? Especially as a the cpa, you are looking at the numbers to work on the tax return. How would you know as a cpa that the donation was used for unrelated purposes?

   1. 

      Maroun, CPA 19 April 2025

      Hello Wendy,

      When a taxpayer gives non‑cash property worth over $5,000, they complete Section B of IRS Form 8283 and obtain the charity’s signature. In that section, the charity certifies in Part V whether it intends to use the property for an unrelated purpose.

      – If the charity checks “Yes” (intends to use the property for an unrelated use), the deduction is limited to the donor’s basis.
      – If the charity checks “No” (does not intend to use the property for an unrelated use), the donor may deduct the full FMV.

      I hope this helps!