Question

Corporations are not allowed to deduct charitable contributions in excess of 10% of the corporation's taxable income (before the charitable contribution and certain other deductions).

a) True
b) False

Answer 1

The statement is true. Corporations are not allowed to deduct charitable contributions in excess of 10% of their taxable income.

Step-by-step explanation:

The statement is true. Corporations are indeed not allowed to deduct charitable contributions in excess of 10% of their taxable income.

Before determining the limit, corporations first calculate their taxable income, which is the income they earned during the year after deducting certain expenses and exemptions. Once the taxable income is determined, the corporation can deduct charitable contributions as long as they do not exceed 10% of the taxable income.

For example, if a corporation has a taxable income of $100,000, the maximum amount of charitable contribution they can deduct is $10,000 (10% of $100,000). If they donate more than $10,000, they will receive a tax deduction for only $10,000, and the excess amount cannot be deducted.