PORTFOLIO

Charitable Contributions By Corporations (Portfolio 794)

Tax Management Portfolio, Charitable Contributions by Corporations, No. 794, discusses issues that arise in connection with the income tax deduction for charitable contributions made by corporations. Although the basic rules authorizing an income tax deduction for contributions by individuals and corporations are similar, corporations contemplating charitable contributions, or creating their own charitable foundations, encounter a number of problems not applicable to individuals.

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DESCRIPTION

Tax Management Portfolio, Charitable Contributions by Corporations, No. 794, discusses issues that arise in connection with the income tax deduction for charitable contributions made by corporations. Although the basic rules authorizing an income tax deduction for contributions by individuals and corporations are similar, corporations contemplating charitable contributions, or creating their own charitable foundations, encounter a number of problems not applicable to individuals.
This Portfolio analyzes the mechanical rules governing the charitable deduction as they apply to corporate donors, including the special rules applicable to gifts of inventory, the special problems of closely-held corporations, corporate foundations, the percentage limitations and carryovers applicable to contributions by corporations, and the issues posed by the interrelation of §§162 (Trade or Business Expenses) and 170 (Charitable Contributions and Gifts) of the Internal Revenue Code, as well as alternatives to direct corporate giving.


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AUTHORS

CAROLYN M. OSTEEN
Carolyn M. Osteen, Esq., Duke University School of Law, LL.M. (1970); Duke University School of Law, LL.B. (1966); Wellesley College; co-author of the Harvard Manual — Tax Aspects of Charitable Giving recently published in its 8th Edition; member of the Massachusetts Attorney General's Public Charities Advisory Committee; Fellow of The American College of Trust and Estate Counsel; formerly served as a Regent of the American College of Tax Counsel and the Governing Council of the Tax Section of the American Bar Association; recent past Chairman of the Exempt Organizations Committee, Tax Section.

A.L. SPITZER, ESQ.
A.L. Spitzer, Esq., Boston College Law School, J.D. (magna cum laude) (1981); Yale University, B.A. (1974); formerly attorney advisor and then Special Assistant to the Assistant Treasury Secretary for Tax Policy, Office of Tax Policy of the U.S. Treasury in Washington, D.C. (1986–1988); chairs annual Massachusetts Continuing Legal Education Nonprofit Law Conference; Chair of the College and University Subcommittee of the American Bar Association Tax Section Committee on Exempt Organizations; past Co-Chair of Unrelated Business Taxable Income Subcommittee of Exempt Organizations Committee of ABA Tax Section; past Chair of Tax Section of National Association of College and University Attorneys; adjunct professor of Taxation, Boston College Law School; Lecturer in the Law, Harvard Law School.

TABLE OF CONTENTS

Detailed Analysis

I. Requirements for a Charitable Deduction

A. In General

B. Corporate vs. Individual Charitable Contribution

C. Fair Market Value

1. Usual Market

2. Fair Market Value of Publicly Traded Securities

3. Contribution When Usual Price Could Not Have Been Expected

4. Abuse Problems Relating to Gifts of Appreciated Property

D. Appraisal Rules

1. What Must Be Appraised

2. "Qualified Appraisal"

3. "Qualified Appraiser"

4. 2006 PPA Guidance

5. The Appraisal Summary-Form 8283

6. Reporting Sales by a Charity-Form 8282

7. The Appraisal Fee

8. Penalties

E. Recordkeeping Requirements

F. Acknowledgment of Charitable Gifts and Quid Pro Quo Rules

1. Acknowledgment

2. Quid Pro Quo Disclosure

3. Criteria for Deductibility

G. Payments for Right to Purchase Tickets to College Athletic Events

II. Special Provisions Pertaining to Corporations

A. Fraternal Associations

B. Domestic Use Restriction

C. Accrual Basis Corporations

1. In General

2. Election and Authorization

3. Time of Payment

III. Denial of § 170 Treatment

A. Relationship Between Donee and Corporate Donor

B. Contributions of Partial Interests in Property

C. Gifts of Stock by Individuals to Avoid Income

D. Validity of Corporate Contributions Under State Law

E. TIPRA Penalties

1. Listed Transactions

2. Prohibited Reportable Transactions

IV. Contribution Rules for Inventory

Introductory Material

A. General Rules

B. Qualified Contribution Exception

1. Requirements for Qualified Contribution

2. Special Rules Applicable to the Qualified Contribution Exception-Recapture Amounts

3. Basis of Inventory and Adjustment to Cost of Goods Sold

C. Exception for Contributions of Research Property

D. Exception for Donations of Computer Technology

E. Gifts of Tangible Personal Property for Non-Exempt Purposes

F. Special Rule for Contributions of Qualified Appreciated Stock - § 170(e)(5)

G. Inventory Accounting Rules

V. Other § 170 Requirements of Importance to Corporate Charitable Contributions

A. Percentage Limitations

1. In General

2. Avoiding the Percentage Limitation

3. Effect of Charitable Contributions on Earnings and Profits

B. Lead Trusts

C. Carryovers and Carryback Rules for Excess Contributions

1. In General

2. Net Operating Loss Carryover

3. Net Operating Loss Carrybacks

4. Capital Losses

5. Availability of Charitable Contribution Carryover to Acquiring Corporations Under § 381

a. Section 381 in General

b. Section 381(c)(19)

D. Research Tax Credits

E. Bargain Sales to Charity

VI. The Relationship of § § 170 and 162

A. In General

B. The Requirement of Economic Motivation Under § 162

C. What Is a Charitable Contribution?-The Requirement of Gratuity Under § 170

D. Corporate Sponsorships of Charitable Organizations-The Issue of UBTI

VII. Special Provisions for S Corporations

A. Comparison of S Corporations and Partnerships When Making Gifts at the Corporate Level

B. Gifts of S Corporation Stock-Taxation of UBTI

C. Reduction of Donor's Deduction for a Gift of S Corporation Stock

VIII. Creating a Corporate Foundation

A. In General

B. Private Foundation Rules

C. Company Scholarships

D. Potential Advantages

E. Potential Disadvantages

IX. Alternatives to Direct Corporate Giving: Supporting Organizations, Donor-Advised Funds, and Commercial Co-Venturing Arrangements

A. Supporting Organizations

1. Limitation on Control by Disqualified Persons

2. Potential Advantages of Supporting Organizations

3. Potential Disadvantages of Supporting Organizations

B. Donor-Advised Funds

1. Growth of "National" Donor-Advised Funds Maintained by Financial Services Firms

2. Potential Advantages of Donor-Advised Funds

3. Potential Disadvantages of Donor-Advised Funds

C. Soliciting Funds on Behalf of Charities: Commercial Co-Venturing Arrangements

X. Disaster Relief

Introductory Material

A. In General

B. Response to September 11, 2001

C. General Provisions of the Victims of Terrorism Act

D. Creating a Disaster Relief Organization Post Hoc

XI. Miscellaneous Matters Relating to Corporate Contributions

Introductory Material

A. Exempt Organizations Subject to Tax on Unrelated Business Income

B. Corporations Subject to the Accumulated Earnings Tax

C. Personal Holding Companies

D. Foreign Corporations


WORKING PAPERS

Working Papers

Table of Worksheets

Worksheet 1 Sample Section 170(a)(2) Election for Accrual Basis Corporation to Deduct Contribution Made in Following Year

Worksheet 2 Tax Reform Act of 1976 - Enactment of § 170(e)(3)

Worksheet 3 Taxpayer Relief Act of 1997 - Enactment of § 170(e)(6)

Bibliography

OFFICIAL

Statutes:

Regulations:

Legislative History:

Treasury Rulings:

Cases:

UNOFFICIAL

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