Charitable Contributions

The basics

• A corporation deducts gifts of cash and property to qualified organizations under §170(c): governments for public purposes; domestic religious, charitable, scientific, literary and educational organizations; veterans’ posts; fraternal lodges (for charitable uses); nonprofit cemetery companies. Never a gift to an individual, however needy. Check the IRS Tax Exempt Organization Search.
• The deductible amount depends on the kind of property (ordinary income or long-term capital gain) and the kind of charity (public or private foundation), and then on the annual ceiling.
• Timing. Cash basis: the year paid or delivered; stock when transferred on the issuer’s books. Accrual basis: may elect to deduct in the year the board authorizes the gift if it is paid within 3½ months after year-end (§170(a)(2)) — April 15 for a calendar-year corporation.

The ceiling, and the new floor

• All contributions for the year, including carryovers, are limited to 10% of taxable income computed without the contribution deduction, the DRD, NOL and capital loss carrybacks, and the §199A(g) deduction (§170(b)(2)). Qualified food inventory gets a separate 15% limit, and the general 10% is reduced by the food gifts allowed.
• Amounts over the ceiling carry forward five years; there is no carryback. Each year the current gifts are used first, then carryovers oldest-first. After five years a carryover is lost. A carryover is reduced to the extent it would increase an NOL carryover (Reg. §1.170A-11(c)(2)) — no double benefit.
• updated 2026 The 1% floor. For tax years beginning after December 31, 2025, the 2025 law allows a corporation’s charitable deduction only to the extent its contributions exceed 1% of the same taxable income base, with the 10% ceiling still on top. A corporation with $400,000 of taxable income and $5,000 of gifts gets a $1,000 deduction. Amounts disallowed by the floor are carried forward only in a year in which the corporation’s contributions also exceed the 10% ceiling; otherwise they are simply lost. check Ordering rules for carryovers under the floor are new — confirm against the 2026 Form 1120 instructions. Every example below was written without the floor.
• added 2026 Historical: the ceiling was 25% for qualified cash gifts in 2020 and 2021, and 25% for food inventory in those years. Relevant only for back-year returns.

Ordinary income property

• Property that would produce something other than long-term capital gain if sold: capital assets held 12 months or less; inventory; art created by the donor; manuscripts and letters prepared by or for the donor; and business property to the extent a sale would produce depreciation recapture (Reg. §1.170A-4(b)).
• Deduction: fair market value less the gain that would be ordinary — which in practice means adjusted basis.
• Inventory. Deductible at cost. If bought or made in the year of the gift, the cost simply stays in cost of goods sold and there is no separate contribution. If it was in opening inventory, remove it from cost of goods sold on Form 1125-A (with an explanation of why opening inventory changed) and deduct it as a contribution on page 1 — where it meets the 10% ceiling.

The enhanced deduction

• Three cases where the deduction is basis plus half the appreciation, but not more than twice basis (§170(e)(3), (e)(4)):
• Inventory, or real or depreciable business property, given to a charity that uses it solely for the care of the ill, the needy or infants, with no payment by the donee and a written statement from the charity.
• Scientific equipment constructed by the donor and given within two years of completion to a college, university or scientific research organization (not a private foundation) that is the original user, for research or research training in the physical or biological sciences, with a written statement.
• Apparently wholesome food from inventory, for the care of the ill, needy or infants, meeting the Food, Drug and Cosmetic Act for 180 days before the gift. A taxpayer not on full-absorption costing may elect to treat basis as 25% of fair market value. Food gifts have their own 15% ceiling.

Long-term capital gain property

• Property held more than 12 months whose sale would produce long-term capital gain — including §1231 property beyond its recapture. Deduction: fair market value, with these exceptions where the deduction drops to basis (§170(e)(1)):
• Tangible personal property the charity does not use in its exempt function (unrelated use), or sells before the end of the year. The donor must reasonably expect a related use at the time of the gift (Reg. §1.170A-4(b)(3)). A painting for the art department is related; a painting for the auction is not.
• Gifts to private nonoperating foundations — except qualified appreciated stock: publicly traded stock of a corporation, held more than 12 months, where the donor and related parties have not given more than 10% of that corporation’s stock. That stock is deductible at fair market value (§170(e)(5)).
• Patents, copyrights, trademarks, trade secrets, know-how and software (other than off-the-shelf); and taxidermy, by the person who did or paid for the mounting.
• Depreciated property (worth less than basis) is deductible at fair market value, and the loss is never recognized. Sell it and give the cash instead.

Substantiation

• Cash under $250: a bank record or a receipt from the charity with its name, the date and the amount. No deduction for cash without one (§170(f)(17)).
• Cash or property of $250 or more: a contemporaneous written acknowledgment from the charity stating the amount or describing the property, whether any goods or services were provided in return and their value, or that only intangible religious benefits were received (§170(f)(8)). Contemporaneous means in hand by the earlier of the date the return is filed or its due date including extensions. A pledge card is not enough; the words “no goods or services were provided” have cost taxpayers six-figure deductions.
• Noncash over $500: Form 8283 for a closely held C corporation (five or fewer persons own more than 50% in the last half of the year), a personal service corporation, or an S corporation. Other C corporations skip this tier.
• Noncash over $5,000: a qualified appraisal by a qualified appraiser, and Form 8283 Section B, for every corporation. Appraisal fees are not part of the gift. Publicly traded securities need no appraisal.
• Deduction over $500,000: attach the appraisal to the return. Art of $20,000 or more: attach the signed appraisal. updated 2026 The appraisal rules now live in Reg. §§1.170A-16 and -17 (2018 regulations); the thresholds are unchanged. E-filed returns attach the appraisal as a PDF.
• Vehicles, boats and airplanes over $500 (§170(f)(12)): the charity’s acknowledgment (Form 1098-C) must carry the donor’s name and TIN and the VIN, and either the gross proceeds of an arm’s-length sale (which caps the deduction) or a certification of the charity’s intended use and that it will not be sold before that use is complete. Attach it to the return.

Study questions 42–56

• 42. James River, accrual, taxable income $60,000, board approves $5,000 in the year, paid April 10 of the next: fully deductible in the current year. (For 2026 the 1% floor would cut it to $4,400.)
• 43. Clothing from inventory, cost $100, retail $200, to a charity dressing low-income women for work: $100.
• 44. No enhanced deduction for a painting from inventory given to a convent for its auction — not for the care of the needy, and sold for money.
• 45. Dealer gives a car (cost $20,000, worth $26,000) to a church for its clergy and an ambulance (cost $30,000, worth $40,000) to a hospital: $55,000 — the car at cost, the ambulance enhanced to $35,000.
• 46. Camping equipment bought in July and donated in December of the same year: $0 as a contribution; the cost stays in cost of goods sold.
• 47. Delivery truck (cost $30,000, depreciation $12,000, worth $22,000) to a day center for infants of addicted parents: $20,000 — basis $18,000 plus half of $4,000.
• 48. Research equipment the donor manufactured (cost $100,000, worth $320,000) to MIT’s nuclear lab: $200,000 — $210,000 capped at twice basis.
• 49. Long-term capital gain property: a painting purchased three years ago, not inventory. Self-created art, food inventory and stock held exactly one year are not.
• 50. Painting (basis $30,000, worth $40,000) to a church to be sold, and public stock held 18 months (basis $20,000, worth $26,000) to a university: $56,000.
• 51. Religious painting (cost $20,000, worth $100,000, held 10 years) given to a church for its sanctuary: deduction $100,000; tax saved at 21%: $21,000.
• 52. Contributions over the ceiling: carried forward five years.
• 53. Patrick Corp: $40,000 gift, $5,000 carryover, taxable income $410,000 after a $20,000 DRD. Deduction $43,000 — 10% of $430,000; $40,000 current plus $3,000 of the carryover.
• 54. Correct: carryovers are used only if current-year gifts are under the limit.
• 55. Closely held C corporation files Form 8283 for noncash gifts over $500.
• 56. A vehicle acknowledgment must include the certification of intended use and its duration when the charity keeps the vehicle. (Sales are to unrelated parties; gross, not net, proceeds; the donor’s, not the donee’s, identification.)

Private reference, not client advice. Notes taken from a 2019 continuing-education course (Thomson Reuters Checkpoint Learning, C Corporations — Overview of Corporate Income Tax); figures and rules brought current to 2026 in October 2026 (P.L. 119-21, Rev. Proc. 2024-40, Rev. Proc. 2025-32). Verify current-year amounts before relying on them.