CHAPTER 2 Corporations Introduction and Operating Rules so 10.2, 7 In 2015, Gray
ID: 2570533 • Letter: C
Question
CHAPTER 2 Corporations Introduction and Operating Rules so 10.2, 7 In 2015, Gray Corporation, a calendar year C corporation, has a $75,000 Decision Making charitable contribution carryover from a gift made in 2010. Gray is contem- er plating a gift of land to a qualified charity in either 2015 or 2016. Gray purchased the land as an investment five years ago for $100,000 (current fair market value is 250,000). Before considering any charitable deduction, Gray projects taxable ome of $1 million for 2015 and $1.2 million for 2016. Should Gray make the gift inc of the land to charity in 2015 or in 2016? Provide support for your answer.Explanation / Answer
Answer: They should defer the gift of the land until 2016.
It would help the corporation to fully deduct the carryover amount of $75000 if by any chance the Gray corporation gifts the land in 2015 they would lose any otherwise allowable deduction of the 75000 carryover amount.
The main reason for this is that current year gifts are applied against the taxable income limitation before applying it to the carry over amounts.
If land is gifted in 2015 it would completely exhaust the limit for the taxable income limitation benefit and corporation would lose the benefit of carrying over 75000 to its last and final year and claim tax benefits