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Adam Inc
Adam Inc. is a taxable Canadian corporation. In 2019, the corporation contributed $360,000 to a registered amateur athletic association. In 2018, the corporation was unable to deduct $126,000 of similar donations. In 2019, the income of the corporation for tax purposes consisted of $620,000 of active business income and $20,000 of property income.
The maximum charitable donation deduction for Adam Inc. in 2019 is? Calculation and explanation.
Expert Solution
Answer:
The maximum deduction against the charity made to a registered association can be made up to the 75% of the net income of the corporation. The unclaimed charity made in any particular year can also be made in the next 5 years.
Maximum deduction = $480,000
Step-by-step explanation
The contribution made to a registered amateur athletic associations is deductible while filling up the income tax return for a corporation. The unclaimed contribution can be carried forward for the next five years and can be claimed in the coming years. However, a corporation can only deduct the contribution equal to 75% of the net income of the corporation.
The contribution made by Adam Inc. in 2019 = 360,000
The contribution made by Adam Inc. in 2018 = 126,000
The net income of the Adam Inc. = 620,000 + 20,000 = 640,000
The maximum deduction can be made up to 75% of net income.
Maximum deduction that can be made in 2019 = 640,000 x 75% = 480,000
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