Charitable Contributions by Business Entities
C-Corporations - Corporations can report the amount of charitable donations on the Form 1120 (Corporate Income Tax Return). The amount of the deduction is based on the following criteria:
  • Ordinary Income property (inventory) - Deduction is limited to the basis in the property. Unless the property is computer equipment for schools, scientific equipment for universities or property for the care or illness of infants – then the corporation receives basis + half unrealized appreciation.
  • Capital Gain property (old equipment) - Deduction is the FMV of the property donated. Deduction will be limited to the property's adjusted basis for certain private foundations, and tangible personal property that is use-unrelated.
Limitations: The maximum allowable charitable deduction for a corporation is 10% of taxable income in any given year.

S-Corporations and Partnerships - The shareholders and partners will receive a Schedule K-1 detailing the allowable deduction. The individual can then report the deduction on their individual tax return.

Sample Questions 1 - 5

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