Question

Accrual basis corporations are allowed a charitable contribution deduction in the year preceding payment if what 2 conditions are met?

Answer 1

Accrual basis corporations can deduct charitable contributions in the tax year before payment if the board authorizes the contribution by year-end and payment is made by the tax return filing due date, including extensions.

Step-by-step explanation:

Accrual basis corporations are allowed a charitable contribution deduction in the year preceding the actual payment if two conditions are met. First, the board of directors must authorize the contribution by the end of the tax year. Second, the payment must be made on or before the due date for filing the corporation's tax return for the year (including extensions).

Meeting these conditions enables accrual basis corporations to receive a deduction in the tax year prior to the payment, which is beneficial for the organization's tax planning. Compliance with regulations concerning charitable contributions is crucial for the legitimacy and potential tax benefits of such donations.

Answer 2

To claim a charitable contribution deduction in the preceding year, an accrual basis corporation must have board authorization by the end of the tax year and make the payment by the 15th day of the third month after the tax year ends.

Step-by-step explanation:

Accrual basis corporations are allowed a charitable contribution deduction in the year preceding payment if two specific conditions are met. First, the board of directors must authorize the contribution by the end of the last quarter of the tax year for which the deduction is claimed. Second, the payment of the contribution must be made by the 15th day of the third month following the close of the tax year.

Careful documentation and adherence to these conditions are required to ensure compliance with tax laws surrounding charitable contributions. It is important for corporations to maintain thorough records of both the board's authorization and the actual payment date in case of an audit. Compliance with these regulations ensures that the corporation can legally claim the deduction for the previous fiscal year, supporting both the corporation's financial planning and the charitable organization's goals.