USA: +1 725-224-8795 
Sign in
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.
|
b. Compute Barsky’s allowable charitable contribution deduction and its final taxable income for its second year.
|
Expert Answer
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 |
