Final answer:
Remsco can deduct the entire amount of its cash donation of $8,670 to a qualified public charity in the tax year 2021, as it falls within the temporarily increased limit of 25% of taxable income due to the CARES Act.
Step-by-step explanation:
In 2021, the current-year charitable contribution deduction for Remsco is determined by the corporation's taxable income and the limitations on deductions for charitable giving. Assuming Remsco makes the necessary elections to maximize deductions, we refer to the IRS guidelines for corporations which generally allowed a deduction for charitable contributions up to 10% of the corporation's taxable income. However, for the tax year 2021, under the CARES Act, this limit was temporarily increased to 25% of the corporation's taxable income.
Given Remsco's taxable income of $73,000, 25% of that amount is $18,250 ($73,000 * 25%). Since Remsco's cash donations of $8,670 to a qualified public charity are less than the increased limit of $18,250, the entire amount of $8,670 is deductible in the current tax year 2021. Importantly, the limit modification applies to cash contributions made to qualifying public charities and not to other types of donations or to contributions made to other types of organizations.
Remsco's current-year charitable contribution deduction is subject to certain limitations based on its taxable income. In this case, Remsco's taxable income is $73,000 and its charitable contribution limit modified taxable income is $30,100. The deduction for cash contributions is generally limited to 60% of the taxpayer's adjusted gross income (AGI).
In this scenario, Remsco donated cash of $8,670 to a qualified public charity. To calculate the deductible amount, we can take 60% of Remsco's AGI, which is $43,800 ($73,000 x 0.6). However, the deductible amount cannot exceed the contributed cash amount of $8,670.
Therefore, Remsco's current-year charitable contribution deduction would be $8,670.