Heron Corporation, a calendar year C corporation, had an excess charitable contribution for 2011 of $5,000. In 2012, Heron made a further charitable contribution of $20,000. Heron's 2012 deduction is limited to $15,000 (10% of taxable income). The current year's contribution must be applied first against the $15,000 limitation.

Question

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When a corporation has an excess charitable contribution in one year, the excess can be carried over to the following year for up to five years. However, any current year charitable contributions must be applied first against the current year's limitation (usually 10% of taxable income) before any carryover amounts can be used. Therefore, in this case, the $20,000 charitable contribution made in 2012 must be applied first against the $15,000 limitation for that year, leaving $5,000 to be carried over to future years.

Heron Corporation, a Calendar Year C Corporation, Had an Excess