Question

Can anybody provide clear instructions of this problem？

#8 Q Corporation has an NOL carryforward-45,000 and the following information: Book Net Income B-TDifferences Taxable Income (all are assumed except for charitable) 500,000 Gross Profit Operating expenses Charitable contributions Dividend Income Net Income 520,000 +5,000 (255,000) 40,000 +20,000 (260,000) (90,000) 80,000 230,000 40,000 How much is modified taxable income? How much is the charitable contribution deduction for tax? What is taxable income?

Answer 1

Tax deduction on charitable contributions ( provided not donated in cash) to notified persons are qualified to the extent of 50% of gross total income without considering net operating losses (NOL).

however, in certain cases, 30% gross total income is deductible for certain contributions. ex: cemetery etc.,

Apart from this, one should also consider the country's law and taxation rules acting upon the person to decide the amount of deduction towards charitable contributions.

considering tax deduction for a charitable contribution to be 50%:
1. modified taxable income would be: 260000

2. tax deduction for charitable contribution assumed to be 50% of actual contribution.

3. actual taxable income would be: 215000( net of NOL and charity deduction)