Can my subchapter S corporation make my charitable donation?

Greetings.

I am the sole shareholder for a Subchapter S corporation I
started several years ago for my business. I have a
substantial amount of money in my business bank account
earmarked for a charitable donation. Obviously, I need to
make this donation before the end of the year.

My question is, can I write the check directly from the
business bank account or do I have to first transfer the
money to my personal account?

I want to ensure that the entire donation is tax deductible
and I'm not sure that that will happen if the donation is
made by the business instead of directly by me. I would
prefer to have the business donate the money. I'm just
looking for confirmation that I won't run afoul of the IRS
if I do that. If it matters, the donation is 10% of the
gross business income for the year.

I thank you for reading this and for your response.

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Richard Piasecki wrote:

> I am the sole shareholder for a Subchapter S corporation I
> started several years ago for my business. I have a
> substantial amount of money in my business bank account
> earmarked for a charitable donation. Obviously, I need to
> make this donation before the end of the year.
>
> My question is, can I write the check directly from the
> business bank account or do I have to first transfer the
> money to my personal account?
>
> I want to ensure that the entire donation is tax deductible
> and I'm not sure that that will happen if the donation is
> made by the business instead of directly by me. I would
> prefer to have the business donate the money. I'm just
> looking for confirmation that I won't run afoul of the IRS
> if I do that. If it matters, the donation is 10% of the
> gross business income for the year.
>
> I thank you for reading this and for your response.

Either way is fine. If the corporation makes the donation,
AND provided of course that the organization qualifies for
the donation being a charitable contribution, the amount is
what's known as a "pass through" item, and will then appear
on your schedule k-1 thus allowing you to include the amount
on your own schedule a.

ChEAr$,
Harlan Lunsford, EA n LA

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<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
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<< Copyright (2005) - All rights reserved. >>
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"Richard Piasecki" <> wrote

> My question is, can I write the check directly from the
> business bank account or do I have to first transfer the
> money to my personal account?

The "S" corporatiojn can pay the charitable contribution.
Charitable contributions are not an expense of the business,
but flow through on the K-1 to your personal return to be
taken on Schedule A.

> I want to ensure that the entire donation is tax deductible

If you can itemize your deductions, and there are no AGI
limitations, the amount will be taken on Schedule A.

> and I'm not sure that that will happen if the donation is
> made by the business instead of directly by me. I would
> prefer to have the business donate the money. I'm just
> looking for confirmation that I won't run afoul of the IRS
> if I do that. If it matters, the donation is 10% of the
> gross business income for the year.

It doesn't matter, as the company ian't taking the
deduction, you will.

You should be, as you know, asking your business accountant
(CPA or EA) about this.

--
Paul Thomas, CPA


<< ================================================== ===== >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
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<< Copyright (2005) - All rights reserved. >>
<< ================================================== ===== >>

Because S-Corp income flows directly to you as personal
income, the S-Corp itself pays no taxes; the shareholders
pay the taxes on all income generated by the S-Corp. Why
not just write the check business-to-self, and then make the
contribution to charity by way of personal check? That way,
it's easy to enter it on your 1040.

<< ================================================== ===== >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2005) - All rights reserved. >>
<< ================================================== ===== >>

Harlan Lunsford <> wrote:
> Richard Piasecki wrote:

>> I am the sole shareholder for a Subchapter S corporation I
>> started several years ago for my business.
>>
>> My question is, can I write the check directly from the
>> business bank account or do I have to first transfer the
>> money to my personal account?

> Either way is fine. If the corporation makes the donation,
> AND provided of course that the organization qualifies for
> the donation being a charitable contribution, the amount is
> what's known as a "pass through" item, and will then appear
> on your schedule k-1 thus allowing you to include the amount
> on your own schedule a.

Is there a limitation on this kind of deduction, e.g. the
shareholder's basis in his stock?

Stu

<< ================================================== ===== >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2005) - All rights reserved. >>
<< ================================================== ===== >>

> I am the sole shareholder for a Subchapter S corporation I
> started several years ago for my business. I have a
> substantial amount of money in my business bank account
> earmarked for a charitable donation. Obviously, I need to
> make this donation before the end of the year.
>
> My question is, can I write the check directly from the
> business bank account or do I have to first transfer the
> money to my personal account?
>
> I want to ensure that the entire donation is tax deductible
> and I'm not sure that that will happen if the donation is
> made by the business instead of directly by me. I would
> prefer to have the business donate the money. I'm just
> looking for confirmation that I won't run afoul of the IRS
> if I do that. If it matters, the donation is 10% of the
> gross business income for the year.
>
> I thank you for reading this and for your response.

It doesn't make any difference whether the check is written
by you personally or by the corporation.

If the corporation makes the donation, it will show up on
your K-1 as a charitable donation. You will then include it
on your 1040, Schedule A.

If the corporation writes a check to you, it will show up as
a distribution to you on the K-1. Then when you write the
check to the charity, you'll inculde it on your 1040,
Schedule A.

Same result either way.

Hope this helps.
Karen Moore, CPA
Illinois

<< ================================================== ===== >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2005) - All rights reserved. >>
<< ================================================== ===== >>

Stuart A. Bronstein <> wrote:
>> Richard Piasecki wrote:

>>> I am the sole shareholder for a Subchapter S corporation I
>>> started several years ago for my business.

> Is there a limitation on this kind of deduction, e.g. the
> shareholder's basis in his stock?

I don't see why there would be, since the donation is still
income to the shareholder (that is, whatever income caused
the money to be in the corp's bank account so it could make
the donation is equally income whether it was donated or
handed to the shareholder).

Seth

<< ================================================== ===== >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2005) - All rights reserved. >>
<< ================================================== ===== >>

Stuart A. Bronstein wrote:
> Harlan Lunsford <> wrote:

>> Either way is fine. If the corporation makes the donation,
>> AND provided of course that the organization qualifies for
>> the donation being a charitable contribution, the amount is
>> what's known as a "pass through" item, and will then appear
>> on your schedule k-1 thus allowing you to include the amount
>> on your own schedule a.

> Is there a limitation on this kind of deduction, e.g. the
> shareholder's basis in his stock?

There's always a possible fly in the ointment, and Stu has
identified it. Didn't occur to me, since ALL my S
corporations are profitable, year after year, and
shareholders never make charitable contributions unless they
have profits.

But yes, such might not eventually be deductible on schedule
a subject to shareholder's less than zero basis.

ChEAr$,
Harlan Lunsford, EA n LA

<< ================================================== ===== >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2005) - All rights reserved. >>
<< ================================================== ===== >>

"Stuart A. Bronstein" <> wrote:
> Harlan Lunsford <> wrote:
>> Richard Piasecki wrote:

>>> I am the sole shareholder for a Subchapter S corporation I
>>> started several years ago for my business.
>>>
>>> My question is, can I write the check directly from the
>>> business bank account or do I have to first transfer the
>>> money to my personal account?

>> Either way is fine. If the corporation makes the donation,
>> AND provided of course that the organization qualifies for
>> the donation being a charitable contribution, the amount is
>> what's known as a "pass through" item, and will then appear
>> on your schedule k-1 thus allowing you to include the amount
>> on your own schedule a.

> Is there a limitation on this kind of deduction, e.g. the
> shareholder's basis in his stock?

I think it would be deductible as a pass-thru item the same
as if he had borrowed the money from the bank, then donated
it. It might reduce his basis, but I don't think the basis
reduction would make it non-deductible on his Schedule A.

<< ================================================== ===== >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2005) - All rights reserved. >>
<< ================================================== ===== >>

"Joe Btfsplk" <> wrote:
> "Stuart A. Bronstein" <> wrote:
>> Harlan Lunsford <> wrote:

>>> Either way is fine. If the corporation makes the donation,
>>> AND provided of course that the organization qualifies for
>>> the donation being a charitable contribution, the amount is
>>> what's known as a "pass through" item, and will then appear
>>> on your schedule k-1 thus allowing you to include the amount
>>> on your own schedule a.

>> Is there a limitation on this kind of deduction, e.g. the
>> shareholder's basis in his stock?

> I think it would be deductible as a pass-thru item the same
> as if he had borrowed the money from the bank, then donated
> it. It might reduce his basis, but I don't think the basis
> reduction would make it non-deductible on his Schedule A.

The point isn't whether it's deductible, but how much is.
For things like depreciation the S-corporation shareholder
is limited in his deductions to his basis in the stock. I
was curious whether that rule would also apply to charitable
deductions.

Stu

<< ================================================== ===== >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2005) - All rights reserved. >>
<< ================================================== ===== >>