Choice "A" is correct. C corporations are allowed a maximum charitable contribution deduction of 10% of taxable income computed before the following deductions:
Any charitable contribution,
The dividend received deduction,
Any net operating loss carryback,
Any net capital loss carryback, and
The U.S. production activities deduction.
Accrued charitable contributions not paid by the end of the year are deductible in the year of accrual if (i) the board of directors authorizes the contribution during the tax year and (ii) the accrual-basis corporation pays the accrued amount by the fifteenth day of the third month (generally 2½ months) following the end of the tax year.Any amount in excess of the "10% limitation" may be carried forward for five years.In this question, the corporation has: (i) an $8,000 unexpired charitable contribution carryover from the previous year, (ii) -0- charitable contributions paid during the current year, and (iii) a $15,000 contribution which the board of directors authorized by the end of the year and which the corporation paid by the fifteenth day of the third month following the end of the tax year. Hence, the deduction before application of the "10% limit" is $23,000: $8,000 + 0 + $15,000. However, the taxable income before the five deductions listed above is $200,000. So, the deduction is limited to $20,000: the lesser of (i) the $23,000 amount before application of the "10% limit" or (ii) $20,000 which is 10% of the $200,000 taxable income before the five deductions listed above.Choices "d", "b", and "c" are incorrect per the above rule and per the above computations.
