Tax Research Memo

Running Head : TAX RESEARCH MEMO

MEMORANDUM TO

TREATMENT OF DONATION

FOR

TAX AND ACCOUNTING PURPOSES

MEMORANDUM TO THE

Date : February 5 , 2008

From : Tax Researcher

Re : Treatment of donation for tax and accounting purposes

Facts

This year (2008 ) Bowen Corporation made three charitable contributions Firstly , from its Bates Corporation stock , Bowen Corporation donated fair monetary value 110 ,000 of property to the state University Secondly , Bowen Corporation donated fair monetary value of 5 ,000 in cash to the Red Cross . And finally , Bowen donated fair monetary

value of 25 ,000 as pledge to pay cash to the Girl Scouts

James Bowen owns 100 of Bowen Corporation stock . Bowen Corporation is a calendar year , accrual method taxpayer . Bowen Corporation purchased the Bates stock three years ago for 30 ,000 and holds a 28 interest , which it accounts for under GAAP using the equity method of accounting . The current carrying value for the Bates stock for book purposes is 47 ,300 On March 3 , 2008 Bowen will pay the pledge to the Girl scouts by check The taxable income of Bowen Corporation for the current year before the charitable contributions deduction , dividends received deduction , NOL deduction , and U .S . production activities , is 600 ,000

Issues

According to Internal Revenue Code (IRC 170 ) donations may prompt for an allowance of deduction from the taxable income . Not all donations are automatically deductable from the taxable income until the transaction is verified under regulations prescribed by the Secretary of State . The treatment of...