Question

The North Broad Street Corporation made a qualified charitable contribution of $125,000 in 2013. In addition, North Broad Street has a charitable contribution carry over of $15,000. North Broad Street’s taxable income before considering the contribution is $650,000 in 2013. What is North Broad Street’s 2013 taxable incomeafter deducting its allowable contribution deduction?

		650,000
		585,000
		525,000
		510,000

Answer 1

According to Internal Revenue service's rule for charitable contribution, any entity made a qualified charitable contribution in any tax year.That charitable contribution is allow to deductable from total taxable income but restricted to certain limit i.e maximum 50% of total taxable income.

If qualified charitable contribution has exceed the limit in any tax year. That exceeded amount has carry over next tax year till 5 year. It can be deductable in any tax year till next 5 years,if contribution has not reached limit for that tax year.

So, The North Broad Street Corporation made a qualified charitable contribution of $125,000 in 2013 and carry over contribution is $ 15,000 for 2013.

Total contribution for 2013 is $ 140,000 ( 125,000 + 15,000).

Taxable income for 2013 is $ 650,000

Since, the total qualified charitable contribution for The North Broad Street Corporation for 2013 will be $ 140,000. It is less than 50% of taxable income for 2013. So, All contribution are deductable from total taxable income in the tax year 2013.

Taxable income after decucting its allowable contribution = 650,000 - 140,000 = $ 510,000

Hence, The North Broad Street Corporation's 2013 taxable income after deducting its allowable contribution is $ 510,000.