Charity Carryforward

[Snaggletooth]

BleedingHeart, Inc. is a for-profit C corp whose board of directors is prone to give lots of money to charities. (Note: for purposes of this discussion, "profit" means pre-tax profits AFTER adding back the charity expense, so the question will not be so cumbersome)

In 2008, the corporation's profits are $100,000 with $40,000 given to charity. Deductible charity is $15,000 with a $25,000 carryforward to 2009.

In 2009, the corporation's LOSS is $150,000 with $20,000 given to charity. A carryforward election is made. What is the charitable carryforward to 2010?

a) $45,000. A loss year undergoes no calculation and ALL the charity in such a year is available for carryforward. The $20,000 is commingled with the $25,000 from 2008.
b) $2,500. The negative loss creates a "negative" 2009 amount of ($22,500) which is 15% of ($150,000). The negative amount is subtracted from the previous carryforward.
c) $60,000. Over a two-year period, the corporation has sustained a $50,000 loss, thus no charity is allowed for the entire duration. The $15,000 deducted in 2008 must be recaptured on the 2009 as a "negative" expense, thus the entire $60,000 has been donated with no deductibility for the two-year period. Given sufficient profits, the entire amount may qualify in 2010.
d) None of the above.

[appelman]

Charity Carryforward

I'll vote for choice (a). (I hope there's not a goat behind that door!)

[Snaggletooth]

No Goats

I'll vote for choice (a). (I hope there's not a goat behind that door!)

Thanks Appelman. I happen to agree on (a). Not intended to be a trick question. An honest question based on ignorance.

[Maribeth]

BleedingHeart, Inc. is a for-profit C corp whose board of directors is prone to give lots of money to charities. (Note: for purposes of this discussion, "profit" means pre-tax profits AFTER adding back the charity expense, so the question will not be so cumbersome)

In 2008, the corporation's profits are $100,000 with $40,000 given to charity. Deductible charity is $15,000 with a $25,000 carryforward to 2009.

In 2009, the corporation's LOSS is $150,000 with $20,000 given to charity. A carryforward election is made. What is the charitable carryforward to 2010?

a) $45,000. A loss year undergoes no calculation and ALL the charity in such a year is available for carryforward. The $20,000 is commingled with the $25,000 from 2008.
b) $2,500. The negative loss creates a "negative" 2009 amount of ($22,500) which is 15% of ($150,000). The negative amount is subtracted from the previous carryforward.
c) $60,000. Over a two-year period, the corporation has sustained a $50,000 loss, thus no charity is allowed for the entire duration. The $15,000 deducted in 2008 must be recaptured on the 2009 as a "negative" expense, thus the entire $60,000 has been donated with no deductibility for the two-year period. Given sufficient profits, the entire amount may qualify in 2010.
d) None of the above.

In 2008 the corporation had $100000 in income, before the $40000 charitable deduction. The limitation on the corporation's charitable deductions is 10% of income, so the deduction for 2008 is $10,000, which leaves taxable income of $90000 and a carryforward of $30000.

In 2009 the corporation has a loss of $150000. No charitable deduction is allowed. The carryforward to 2010 is $50,000, which is $30000 from 2008 and $20000 from 2009.

The corporation has a 5 year carryforward for charitable contributions. The carryforward will expire first-in, first-out.

If the corportion is carrying forward an NOL in a year in which a charitable carryforward expires, the NOl carryforward will be increased by the amount of charitiable carryforward expired.

Maribeth

[appelman]

Oops!

Maybe there was a small goat after all. I didn't notice that you were taking a 15% allowance.

[Snaggletooth]

Oops II

There was indeed an unintended goat. Thanks Maribeth for straightening me out on the proper percentage. I also agree with your response.