Monroe Corporation reported the following results for the current year: $\begin{array}{llcc}
\text { Gross income from operations } &\$150,000 \
\text { Operating expenses } &154,000\
\text { Dividends from $ 30 \% $ owned domestic corporation } &100,000\
\text { Long-term capital gain } &2,000\
\text { Short-term capital loss} &(3,000)\
\text { Charitable contributions } &15,000\
\end{array}$
Included in the above is $5,000 of qualified production activities income.In addition, Monroe Corporation has a $5,000 NOL carryforward from last year.How much can Monroe Corporation take as a charitable contribution deduction in the current year?

Question

Monroe Corporation reported the following results for the current year: $\begin{array}{llcc}
  \text { Gross income from operations } &\$150,000  \
 \text { Operating expenses } &154,000\
 \text { Dividends from $ 30 \% $ owned domestic corporation } &100,000\
 \text { Long-term capital gain } &2,000\
 \text {  Short-term capital loss} &(3,000)\
 \text { Charitable contributions } &15,000\
\end{array}$
 Included in the above is $5,000 of qualified production activities income.In addition, Monroe Corporation has a $5,000 NOL carryforward from last year.How much can Monroe Corporation take as a charitable contribution deduction in the current year?

Quizplus · Accepted Answer

The charitable contribution deduction is limited to 10% of taxable income before the deduction of the charitable contribution, NOL carryforward, and dividends-received deduction. Taxable income is $98,000 ($150,000 - $154,000 + $100,000 + $2,000 - $3,000). 10% of $98,000 is $9,800, but the maximum deduction is $10,000 due to the $15,000 contribution.

Monroe Corporation Reported the Following Results for the Current Year