# Question & Answer: In its first year, Barsky Corporation made charitable contributions totaling \$30,000. The corporation's taxable income before any charitable…..

In its first year, Barsky Corporation made charitable contributions totaling \$30,000. The corporation’s taxable income before any charitable contribution deduction was \$250,000. In its second year, Barsky made charitable contributions of \$15,000 and earned taxable income before the contribution deduction of \$300,000.

a. Compute Barsky’s allowable charitable contribution deduction and its final taxable income for its first year.

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Question & Answer: In its first year, Barsky Corporation made charitable contributions totaling \$30,000. The corporation's taxable income before any charitable…..
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 Allowable charitable contribution deduction Final taxable income

b. Compute Barsky’s allowable charitable contribution deduction and its final taxable income for its second year.

 Allowable charitable contribution deduction Final taxable income

a.Allowable charitable deduction

=>10% of income before any charitable deduction =>10% *\$250,000 =>\$25,000.

final taxable income = \$250,000 – \$25,000 =>\$225,000.

excess charity paid =>\$30,000 – \$25,000 =>\$5,000.

 Allowable charitable deduction \$25,000 Final taxable incomr \$225,000

this \$5,000 can be carried forward for 5 years.

b.allowable charitable deduction in second year

=>lower of,

(\$15,000 + \$5,000 carried forward =>\$20,000) or

10% of \$300,000 =>\$30,000.

Which means \$20,000 is allowable deduction for year 2.

final taxable income for year 2 = \$300,000 – \$20,000 =>\$280,000.

 Allowable charitable deduction \$20,000 Final taxable income \$280,000