Memorandum #1 For 2016, Marvel Corporation had a net taxable income before charitable contributions of 10 M. During the same year, Marvel contributed 1.5 M’to the Make-A-Wish Foundation, a 501(c)(3) organization. Marvel needs to know how much of the charitable contributions will be deductible on its Form 1120. 121031580-1504049 pa 2 3 4 5 6 7 9 WE
1. Summary of Facts:
Taxpayer = Marvel Corporation
FY = 2016
Taxable income before charitable contribution = 10M
Charitable Contribution to 501(c)(3) organisation = 1.5M
Amount of charitable contribution deductible on Form 1120.
3. Analysis and conclusion:
Though charitable donation to 501(c)(3) is tax deductible; but the amount of deduction cannot exceed 10% of taxable income. Excess donation if any can be carried forward to next year. So, the maximum amount of deduction that can be claimed by Marvel Corpporation is 1M (10%*10M). However, remaning 0.5M (1.5M-1M) can be carried forward and claimed in next year.