Can anyone explain this please?
Robin, a C corporation, had revenues of $200,000 and operating expenses of $75,000. Robin also received a $20,000 dividend from a domestic corporation and is entitled to a $14,000 dividend-received deduction. Robin donated $15,000 to a qualified charitable organization in the current year. What is Robin's contribution deduction?
a. $14,500
b. $13,100
c. $13,900
d. $15,000
The correct answer is A
I did 200,000-75,000+20000+15,000 = 160,000 160,000 x 10% = 16,000
15,000 is less than 16,000 so you can use all of it. Even the given explanation says to add back the charitable contribution.
Explanation
Choice “a” is correct. Corporations making contributions to recognized charitable organizations are allowed a maximum deduction of 10% of their taxable income. Taxable income is calculated before the deduction of: (1) any charitable contribution; (2) the dividends received deduction; (3) any net operating loss carryback; (4) any capital loss carryback; or, (5) U.S. production activities deduction.
Revenues $ 200,000
Dividends Received 20,000
Less: Operating expenses (75,000)
Income before the dividends received deduction 145,000
x 10%
Maximum allowable charitable deduction $ 14,500
Note: Excess charitable contributions not allowed as a deduction due to the 10% limitation may be carried forward up to five years.
Choice “d” is incorrect. The full $15,000 would not be allowed due to the 10% limitation illustrated above.
Choice “c” is incorrect. The dividends received are considered in taxable income for purposes of the 10% limitation.
Choice “b” is incorrect. The 10% limitation is applied before the dividends received deduction.
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