In 2015, Gray Corporation, a calendar year C corporation, has a$75,000 charitable contribution carryover from a gift made in 2010.Gray is contemplating a gift of land to a qualified charity ineither 2015 or 2016. Gray purchased the land as an investment fiveyears ago for $100,000 (current fair market value is $250,000).Before considering any charitable deduction, Gray projects taxableincome of $1,000,000 for 2015 and $1,200,000 for 2016.
Should Gray make the gift of the land to charity in 2015 or in2016?
Note: If an amount is zero, enter "0".
a. If Gray makes the gift of the land tocharity in 2015:
The amount of the deduction would be $ _________and the corporationis able to use $ __________of the $75,000 carryover. The excess of$ _____________would carryover to 2016.
b. If Gray makes the gift of the land tocharity in 2016:
In 2015, the corporation is able to use $ ______________ of the$75,000 carryover. In 2016, the amount of the deduction would be $_____________ and the excess of $ ________________would carryoverto 2017.
c. Therefore, Gray should make the gift of theland to charity in year ________.
In 2015, Gray Corporation, a calendar year C corporation, has a$75,000 charitable contribution carryover from a gift made in 2010.Gray is contemplating a gift of land to a qualified charity ineither 2015 or 2016. Gray purchased the land as an investment fiveyears ago for $100,000 (current fair market value is $250,000).Before considering any charitable deduction, Gray projects taxableincome of $1,000,000 for 2015 and $1,200,000 for 2016.
Should Gray make the gift of the land to charity in 2015 or in2016?
Note: If an amount is zero, enter "0".
a. If Gray makes the gift of the land tocharity in 2015:
The amount of the deduction would be $ _________and the corporationis able to use $ __________of the $75,000 carryover. The excess of$ _____________would carryover to 2016.
b. If Gray makes the gift of the land tocharity in 2016:
In 2015, the corporation is able to use $ ______________ of the$75,000 carryover. In 2016, the amount of the deduction would be $_____________ and the excess of $ ________________would carryoverto 2017.
c. Therefore, Gray should make the gift of theland to charity in year ________.
Related questions
Dan Simms is the president and sole shareholder of SimmsCorporation. Dan plans for the corporation to make a charitablecontribution to the University of Washington, a qualified publiccharity. He will have the corporation donate Jaybird Corporationstock, held for five years, with a basis of $11,000 and a fairmarket value of $25,000. Dan projects a $310,000 net profit forSimms Corporation in 2015 and a $100,000 net profit in 2016. Dancalls you on December 11, 2015, and asks whether he should make thecontribution in 2015 or 2016.
Complete the letter advising Dan about the timing of thecontribution.
If required, round computations to the nearest dollar.
Click here to access the tax table to use for this problem.
Hoffman, Maloney, Raabe, & Young, CPAs |
December 17, 2015 |
Mr. Dan Simms, President |
Dear Mr. Simms: |
On December 11, you asked me to advise you on the timing of acontribution by Simms Corporation to the University of Washington.My calculations show that the corporation will maximize its taxsavings by making the contribution in year ___________ Item 1. |
If the corporation makes the contribution in 2015, it can deduct$ _________ as a charitable contribution, which will save $________ in Federal income tax. However, if the corporation makesthe contribution in 2016, the percentage limitations applicable tocorporations will limit the 2016 deduction to $__________ . Thecorporation will save $ ______________ in taxes as a result of thisdeduction. The corporation may carry the remaining $ _____________forward for five years or until exhausted. If the corporationcontinues at the 2016 profit level, it will save an additional $______________, for a total tax savings of $ ______________. |
This analysis makes it clear that the corporation will save $___________ more if it makes the contribution in year ___________.In addition, all of the savings will occur in year ______________.If the corporation makes the contribution in year _________, itstax savings will be split among several years. My advice is thatthe corporation should make the contribution ___________ so thatownership of the stock can be transferred by ______________ Selecteither December 31, 2015or March 15, 2016. |
Sincerely, |
Alicia Gomez, CPA |
Joseph Thompson is president and sole shareholder of JayCorporation. In December 2015, Joe asks your advice regarding acharitable contribution he plans to have the corporation make tothe University of Maine, a qualified public charity. Joe isconsidering the following alternatives as charitable contributionsin December 2015:
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Joe has asked you to help him decide which of these potentialcontributions will be most advantageous taxwise. Jay's taxableincome is $3,500,000 before considering the contribution.
Rank the four alternatives, and complete the letter to Joecommunicating your advice.
Note: The land and stock are "unrelated use property" but theyare not "tangible personal property".
Hoffman, Maloney, Raabe, & Young, CPAs |
December 10, 2015 |
Mr. Joseph Thompson |
Dear Mr. Thompson: |
I have evaluated the proposed alternatives for your 2015year-end contribution to the University of Maine. I recommend thatyou sell the Brown Corporation stock and donate the proceeds to theUniversity. The four alternatives are discussed below. |
Donation of cash, the unimproved land, or the Brown Corporationstock each will result in a $ __________ charitable contributiondeduction. Donation of the Maize Corporation stock will result inonly a $ ______________charitable contribution deduction. |
You will benefit in two ways if you sell the Brown Corporationstock and give the $ __________in proceeds to the University.Donation of the proceeds will result in a $ ___________charitablecontribution deduction. In addition, sale of the stock will resultin a $ _________ long-term capital ______________. If JayCorporation had capital __________________of at least $ ___________and paid corporate income tax in the past three years, the entire_______________could be ________________and Jay would receive taxrefunds for the carryback years. If Jay Corporation_______________capital gains in the carryback years, the capitalloss could be carried forward and offset against capital gains ofthe corporation for up to _______________years. |
Jay Corporation ________________ make the donation in time forthe ownership to change hands before the end of the year.Therefore, I recommend that you notify your broker immediately sothat there will be no problem in completing the donation on atimely basis. |
I will be pleased to discuss my recommendation in further detailif you wish. Please call me if you have questions. Thank you forconsulting my firm on this matter. We look forward to serving youin the future. |
Sincerely, |
Richard Stinson, CPA |
