Memorandum: Donating to Charitable Organization
Overview: This milestone will help you complete Section II of the final project by creating the second memorandum for the charitable giving deduction scenario. Prompt: You are a tax advisor and your client, Nora, owns and operates C-C Bakery (a C-Corp for tax purposes). She encounters three different tax scenarios on which she requests your advice. You are to research the relevant tax code and make recommendations to her in the form of a memorandum for each situation. Nora has some further questions for you regarding her individual tax return and C-C Bakery. Her business has been doing extremely well, and she has decided to give back to her community. She would like to contribute $70,000 in December of this year to the charitable and nonprofit Boys and Girls Club. She would like to know if she should contribute this from her business account (C-Corp) or her individual account (1040 return). She would also like to know if there are any tax advantages or limitations. Her bakery has been profitable, as her taxable income is projected to be around $500,000 on this year’s tax return. Her adjusted gross income on her individual return will be around $350,000. She has made no further charitable contributions throughout the year. In a short memo, advise how she can take advantage of the deduction for the charitable contributions to her community via her individual return and/or corporate return. Be specific regarding code sections or any other primary or secondary sources. You will find a memo template in Chapter 10 of the Federal Tax Research textbook. Specifically, the following critical elements must be addressed: II. Charitable Giving A. Identify sources for evaluating appropriate tax situation B. Document research performed to determine if charitable giving applies to tax year and specific limitations, describing results C. Apply research to individual or business tax years and determine amount of deduction D. Document findings and advice in a memorandum to the client, including supporting details
Charitable Contribution Memorandum
Name
Instructor
Institutional
Date
To: Nora
From: Tax Advisor
Subject: Donating to Charitable organization
Date: 9th December 2022.
Summary
Client, Ms. Nora, the owner of C-C Bakeries, wishes to contribute about $70,000 to a charity organization that goes by the name Boys and Girls Club. The payment are to be made in the month of December. Considering that there is the case of a charitable organization being involved, this means that it is bound to be exempted from tax. It is worth noting that this is her first charitable contribution of the year. According to the SEC (n.d.), organizations that are not for profit such as educational institutions, charitable, and religious institutions. Based on projections, the taxable income for C-C Bakeries for the year is $500,000, while the adjusted one is &350,000.
Issues
There are fundamental issues when it comes to accounting and the related tax implications for any individual or organization. In this case, the main focus is on the type of account that Nora needs to use in the process of donating to Boys and Girls Club. They type of account she will use will have significant implications on the taxation rate she will incur. It is therefore worth considering the financial situation in question to ensure that Nora has the soundest financial decision for herself and her business.
Laws and Analysis
Nora intends to engage in a charitable contribution. A charitable contribution is one that fulfils all the requirements of being not for profit with its resources, be it money or property. As initially stated, such organizations are usually exempt from taxation by the government. These are organizations that qualify for such status under the section 501(c) (3) of the internal revenue code (IRC)(Kagan,2022).It is important for Nora to understand that such a contribution needs to be voluntary and she should not do it with expecting something in return, as this would essentially make the donation lose meaning and expose the organization to both legal and tax complications. In other terms, these donations need to be unrequited, with no backdoor deals expected for her or the organization.
Kagan (2022) notes that the IRC stipulates that one can contribute towards charitable organizations from their income tax returns. These contributions however, are usually made after these incomes have been taxed. There are certain limit...