Question

In Year 1, Citradoria Corporation is a regular corporation that contributes $35,000 cash to qualified charitable organizations during the current tax year. The corporation has net operating income of $145,000, before deducting the contributions, and dividends received from domestic corporations (ownership in all corporations is less than 20 percent) in the amount of $25,000. A. In Year 2, Citradoria contributes $5,000 to charitable organizations. The corporation has net operating income of $150,000 before deducting the contributions, and no dividend income. What is the amount of Citradoria’s allowable deduction for charitable contributions for Year 2? $ B. If there is any carryover of the charitable contribution deduction from Year 2, what year will it expire (e.g., Year 3)?

Answer 1

In year 1

taxable income = 145000+25000 =170000

Tax = 170000*10% =17000

Allowable deduction = 17000

Carried forward amount in year 2= 35000-17000=18000

Part A

amount of Citradoria’s allowable deduction for charitable contributions for Year 2 = 150000*10% = 15000

Part B

If there is any carryover of the charitable contribution deduction from Year 2, it will expire in year 7 (it will be carried forward for 5 years)