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n year 1 (the current year), LAA Inc. made a charitable donation of $100,000 to the...

n year 1 (the current year), LAA Inc. made a charitable donation of $100,000 to the American Red Cross (a qualifying charity). For the year, LAA reported taxable income of $550,000, which included a $100,000 charitable contribution deduction (before limitation), a $50,000 dividends received deduction, and a $10,000 net operating loss carryover from year 0.

What is LAA Inc.’s charitable contribution deduction for year 1?

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Answer #1

Limited to 10% of taxable income before any charitable contribution, before DRD, and the domestic production activities deduction, and after the NOL carryovers

Taxable income = 550,000+100,000+50,000+20,000 = 720,000

Deduction = $720,000 *.10 = $72,000

The remaining $28,000 ($100,000 donation minus $72,000 deductible amount) is carried over for up to five years.

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