Karyn Scott
The enhanced charitable deduction is for inventory or stock in trade donated for the benefit of the ill, the needy, or infants and is generally only available to C-corporations. However, Congress extended the enhanced deduction to all business entities for the following four contributions:
- Donation of food: to a 501C3 organization that benefits the ill, needy or infants.
- Charitable book donations: means a charitable contribution of books to a public school which is an educational organization (kindergarten through grade 12).
- Donation of technology: Donated technical equipment manufactured or assembled by the donor and contributed within two years of construction to a higher education institute or eligible 501C3 research institute.
- Contribution of computers that have been in use for no more than three years to a public or private educational organization or a public library.
The American Taxpayer Relief Act extended the Katrina Emergency Tax Relief Act (KETRA) of 2005 until December 31, 2013. The deduction is calculated on basis, plus 50% of unrealized appreciation, limited to two times basis.
Example:
ABC Grocery Store donates stale dated food to the Food Bank.
Costs of Goods Sold (basis) = $10,000
Retail value on Cost of Goods = $11,500
(Appreciated market value)
Unrealized appreciation = $1,500 x 50% = 750
TOTAL DEDUCTION = $10,750 (meets two times basis rule*, i.e., $20,000)
*two times basis rule = lesser of basis plus 50% of unrealized appreciation, or two times basis.
Contact us to learn more about the requirements of this deduction and to determine if you qualify.