Dear TaxGuru,

My C-Corporation client made a big charitable donation from his Corporation. I was confused as to how to handle this on the tax return. I was having problems explaining the tax treatment to the client. Can you kindly once again share your expertise in simple words as to how I should be treating this deduction for tax purposes?

Thanks a million TaxGuru!

The IRS has imposed limitations of deductibility of Charitable contributions made by a C Corporation.

In general, the corporations have no restrictions on the amount of charitable contributions that they make. However, obtaining a current year tax deduction is another matter.

The IRS rules state the the Corporation is entitled to deduct upto a maximum of 10% of a Corporations net taxable income without consideration of NOL and Charitable contribution. In other words, calculate the taxable income w/o deduction of charitable contribution, and a maximum limit is 10% of this taxable income.

Therefore, if there is no taxable income, the corporations would not be able to deduct charitable contributions for that calendar year.

I guess the next question would be, what if your client, the C corporation made a contribution in excess of the 10% limit. Well, the IRS allows the Corporations to simply carryover the excess to future years, to allow deductions in those years provided the rules for deductibility are met.

__________________
Find a CPA near you!

Ask TaxGuru Please refer to the legal disclaimer.