ExpertHard1 markMultiple Choice
CPA · Question 29 · Area V: Entity Taxation
A C Corporation has taxable income of $500,000 before the charitable contribution deduction and the Dividends Received Deduction (DRD). It made cash charitable contributions of $60,000. It received $10,000 in dividends from a 15%-owned domestic corporation. What is the corporation's allowable charitable contribution deduction?
A C Corporation has taxable income of $500,000 before the charitable contribution deduction and the Dividends Received Deduction (DRD). It made cash charitable contributions of $60,000. It received $10,000 in dividends from a 15%-owned domestic corporation. What is the corporation's allowable charitable contribution deduction?
Answer options:
A.
$60,000
B.
$50,000
C.
$51,000
D.
$44,000
How to approach this question
Corporate Charitable Limit = 10% of Taxable Income BEFORE: Charitable deduction, DRD, Capital loss carryback. Base = $500k. Limit = $50k.
Full Answer
B.$50,000✓ Correct
The charitable contribution deduction for a corporation is limited to 10% of taxable income computed *without* regard to the charitable deduction, DRD, or capital loss carrybacks. $500,000 x 10% = $50,000. The actual contribution ($60,000) is limited to $50,000. The excess $10,000 carries forward.
Common mistakes
Subtracting the DRD before calculating the 10% limit.
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