Charitable Contribution Research Paper

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A. Charitable Contributions
Charitable contributions can be deducted by a business entity if the organization receiving the money is considered to be a qualified charitable organization by the IRS. Publication 526 classifies a qualified charitable organization as an organization that operates as a non-profit that involves partaking in humanitarian activities. Examples of charitable organizations include: churches, schools, and the American Cancer Society. Charitable contributions are when the intentions of reciprocity in some form are not present when money is given. However, if something is given to the business owner in return; it is not considered a charitable donation and is to be treated differently as a tax deduction. (Lee 2014) (Publication 526: Charitable Contributions 2015).
B. Sole Proprietorship
If the business owner of a sole proprietorship decides to donate to charity, he or she can deduct the amount as a charitable …show more content…
A shareholder with 100% ownership of the company is to claim the charitable contribution deduction as an itemized deduction. However, the deduction is subject to the limitations based on the filing status threshold. If a shareholder gives money to a local church, the amount to be deducted cannot be more than 50% of his or her AGI. There is the added benefit of using the carry-over method if a shareholder is unable to claim a deduction. Making a charitable contribution can help lower taxable income if the shareholder is able to claim itemized deductions. However, this deduction may be subject to the 2% limitation on the Schedule A. If there are other shareholders, the charitable contribution deduction would be distributed equally (Marz 2016) (Publication 526: Charitable Contributions 2015) (Schedule K-1: Shareholder's Share of Income, Deductions & Credits
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