ParentCo's separate taxable income was $200,000, and JuniorCo's was $50,000. Consolidated taxable income before contributions was $200,000. Charitable contributions made by the affiliated group included $5,000 by ParentCo and $1,000 by JuniorCo. Compute the group's maximum charitable contribution deduction.
A) $0
B) $600
C) $6,000
D) $20,000
E) $25,000

Question

Quizplus · Accepted Answer

The maximum charitable contribution deduction for a consolidated group is generally 10% of the consolidated taxable income before contributions. Here, 10% of $200,000 is $20,000. However, the actual contributions made by the group total $6,000 ($5,000 by ParentCo and $1,000 by JuniorCo), so the maximum deduction is limited to the actual contributions made, which is $6,000.

ParentCo's Separate Taxable Income Was $200,000, and JuniorCo's Was $50,000