[tmacpa]

NINJA Question –

I feel like I’m seeing more and more errors in the mcq for reg.

I’m slowly losing my mind. Maybe I’m just unlucky that the ones with errors are all showing up at once
#1239
Tapper Corp., an accrual-basis calendar-year corporation, was organized on January 2, 2016. During 2016, revenue was exclusively from sales proceeds and interest income. The following information pertains to Tapper:

Taxable income before charitable contributions for
the year ended December 31, 2016 $500,000
Tapper’s matching contribution to employee-designated
qualified universities made during 2016 10,000
Board of Directors’ authorized contribution to a qualified
charity (authorized December 1, 2016, made February 2, 2017) 30,000

What is the maximum allowable deduction that Tapper may take as a charitable contribution on its tax return for the year ended December 31, 2016?

A. $0
Incorrect B. $10,000
C. $30,000
D. $40,000

Explanation:
A corporation’s charitable contribution deduction each year cannot exceed 10% of its “taxable income” for the year. Taxable income means income before deducting the charitable contribution, the dividends-received deduction or net operating loss or capital loss carrybacks (only) to that year.

IRC Section 170(b)(2)

Also, an accrual method corporation whose Board of Directors has authorized a charitable contribution during the tax year may deduct the contribution in the authorization year, if paid within 2-1/2 months following the close of the year.

Regulation Section 1.170A-11(b)

$500,000 × 10% = $50,000 Maximum Contribution Allowed in 2016.
$10,000 (Cash) + $30,000 (Paid 2/2/2016) = $40,000 Charitable Contribution allowed on its tax return for the year ended December 31, 2016.

SO in the question it says the second contribution was actually made on 2/2/17, and in the answer it says 2/2/16

[Missy]

It's a typo but doesn't change the answer 🙂

Licensed Massachusetts Non Reporting CPA since 2012
Finance/Admin/HR Manager

[tmacpa]

So a contribution is deductible this year even if it wasn't paid til next year?

[Missy]

Only if it was paid out on or before feb 14. If paid feb 16 it's only deductible in the year paid. Same goes for employee bonuses, which is why they're usually paid end of January.

Licensed Massachusetts Non Reporting CPA since 2012
Finance/Admin/HR Manager

[Missy]

Sorry it's March 15 not feb 14, my bad! It's deductible in the previous year if paid by the middle of March!

Licensed Massachusetts Non Reporting CPA since 2012
Finance/Admin/HR Manager

[tmacpa]

ok thanks

[Nancy]

That is not a typo. As long as it was authorized before year end and paid the first 2.5 months after the year end period it is still deductible. If it was authorized after year end and paid after year end it should go on the next years return.

Think of it like when you contribute to a Roth IRA, you can still contribute the first 2.5 months into the next year. For example, this year I am planning to contribute 2k in my roth in January and February 2017, but can count it towards my 2016 contribution limit and it will go on my 2016 tax return.

For I can do everything through Christ, who gives me strength.
Philippians 4:13

[Nancy]

Oh wait yes the answer should say 2/2/17, that part is a type o I thought you meant the question had a typo.

For I can do everything through Christ, who gives me strength.
Philippians 4:13

[Author]

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