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Jonathan Tierney
Jonathan Tierney, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 307
Experience:  Tax Accountant at Praxair, Inc.
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I have a complicated tax question, federal. It involves

Customer Question

I have a complicated tax question, federal. It involves donations to qualified entities
JA: The Expert will know what to do. Please tell me everything you can so the Expert can help you best.
Customer: Can a corp that has lots of tax deductions from donations, but without any tax liability or income be bought by another corp that does have a tax liability so that the buying corp can benefit by the deductions. If possible, are there limits on amounts and time (years) to use deductions to reduce federal taxes?
JA: Is there anything else the Expert should be aware of?
Customer: not now
Submitted: 2 months ago.
Category: Tax
Customer: replied 2 months ago.
Donations are to a State University and consist of issued Patents in US and EU involving medical technology
Expert:  PDtax replied 2 months ago.

Hi from Just Answer. I'm PDtax, and can assist.

Expert:  PDtax replied 2 months ago.

An acquiring corporation can deduct contributions of an acquired corporation, subject to certain limitations.

Treas. Regs. 1.1502-24 Consolidated charitable contributions deduction specifies the application of IRC 170, which allows the limited charitable deduction contribution.

Thanks for asking at Just Answer. Positive feedback is appreciated. I'm PDtax.

Customer: replied 2 months ago.
This answer in inadequate. Although the complete answer may be derived by information contained in the Tax code referenced, i.e. Treas. Regs. 1.1502-24 and IRC 170, my question as a layman needs the expert to convert the Tax code into something I can understand. I need more detailed information to get the answer to my question.
Expert:  PDtax replied 2 months ago.

I'm sorry, but the only way to really answer your question is to get your facts, and address the potential acquisition/combination.

(Edited by Moderator)
Expert:  PDtax replied 2 months ago.
(Edited by Moderator)
Customer: replied 2 months ago.
OK, that makes sense, but I don't feel that I got my moneys worth on the first answer. How about if I ask a specific question regarding the tax code that relates to my situation while I consider the $300 offer? The question is this-
If the combined C corp (the donating and absorbing corp) has a tax liability of $100,000. and a donation credit of $1,000,000. How much of the $100,000. tax liability can go away.
Expert:  Jonathan Tierney replied 2 months ago.

Hi, my name is ***** ***** expert. The limit on deductions for charitable contributions is found in IRC 170(b)(2) which provides that a corporation may not deduct more than 10% of its taxable income as charitable deductions. Taxable income for this purpose is calculated by not including the following items: 1) the charitable contribution deduction, 2) the dividends received deduction, 3) IRC 249 deduction, 4) the domestic production activities deduction, 5) any net operating loss carryback to the tax year, 6) any capital loss carryback to the tax year.

You did not mention whether the $100K in taxable income is calculated before or after the charitable deduction, or any of the six above items. Therefore, if the $100K in taxable income does not included any charitable contributions, the deduction would be limited to $10K in that tax year, resulting in $90K in net taxable income. If your $100K of taxable income includes, say, $20K in charitable contributions, then taxable income for the charitable deduction limit would be $120K and limited to $12,000 for that year resulting in net taxable income.

Expert:  Jonathan Tierney replied 2 months ago.

I can be more analysis of your specific situation, but like PDtax, I would need to post and additional service offer.

Expert:  Jonathan Tierney replied 2 months ago.

Just a FYI: you can find IRC 170(b)(2) here: https://www.law.cornell.edu/uscode/text/26/170.

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