Answer the following statements true (T) or false (F)

Question

1. An accrual-basis corporation can only deduct contributions made by year-end.
2. Corporate charitable deductions are limited to 10% of the corporation's taxable income for the year.
3. All casualty loss deductions, regardless of the type of asset, are allowed as itemized deductions.
4. Ivan's AGI is about $100,000 this year, and his typical medical expenses average about $4,000 per year. He will be in the 24% tax bracket. Ivan plans to partially retire next year at age 60 so he expects about a $60,000 reduction in AGI and his marginal tax rate to drop. Ivan will have about $1,000 of non-emergency dental work done in the next few months. Ivan should get the dental work done this year so he can enjoy tax savings at the higher tax rate.
5. A taxpayer can deduct a reasonable amount for small out-of-pocket (i.e., cash) donations.

Answer 1

1. FALSE
An accrual-basis corporation which pledges a contribution authorized by the board of directors can deduct the contribution in the year of the pledge if it fulfills the pledge by the fifteenth day of the third month following year-end.
2. TRUE
The charitable contribution ceiling for corporations is 10% of taxable income.
3. FALSE
Casualty loss deductions for assets used in a business or in the production of rent or royalties are deductions for AGI.
4. FALSE
Ivan will not get over the 7.5% of AGI floor this year so none of the costs of the dental work will reduce his taxable income. Next year his AGI will be low enough that the dental costs will lower his taxable income, resulting in tax savings.
5. FALSE
All charitable contributions must be supported by qualifying documentation such as receipts.