| Announcement 2005-84 |
November 28, 2005 |
Charitable Giving Incentives
This announcement is to advise partnerships and S corporations with
fiscal tax years beginning in 2004 and ending after August 27, 2005, of two
act sections in the Katrina Emergency Tax Relief Act of 2005 that may benefit
their partners and shareholders. This announcement is intended to supplement
the 2004 instructions for Forms 1065 and 1120-S.
Temporary Suspension of Limitations on Certain
Cash Contributions (Act Section 301)
Qualified contributions. Cash contributions
made by a partnership during the period beginning on August 28, 2005, and
ending on December 31, 2005, to charitable organizations described in Internal
Revenue Code (IRC) section 170(b)(1)(A) (except for organizations described
in IRC section 509(a)(3)) qualify for suspension of the following limitations.
Individual partners.
For individual partners that elect this provision, their distributive shares
of these qualified contributions are not limited by either:
An individual partner’s deduction for qualified cash contributions
is allowed to the extent the individual’s adjusted gross income (computed
without regard to any net operating loss carryback) exceeds the deduction
for other charitable contributions. See publication 526, Charitable
Contributions, for information on adjusted gross income limitations
on deductions for charitable contributions.
Corporate partners.
For corporate partners that elect this provision, their distributive shares
of these qualified contributions are not subject to the 10% taxable income
limitation. A corporate partner’s deduction for qualified cash contributions
is allowed to the extent the corporation’s taxable income (as computed
in IRC section 170(b)(2)) exceeds the deduction for other charitable contributions.
Qualified contributions passed through to corporate partners are limited
to contributions for relief efforts related to Hurricane Katrina.
Rules similar to those for partnerships discussed above also apply to
S corporations and their shareholders.
Reporting on Schedule K-1 for partnerships and
S corporations. If a partnership or S corporation has made any
cash contributions that qualify for these provisions, it must attach a statement
to the Schedule K-1 (for the 2004-2005 fiscal tax year) separately reporting
the partner’s or shareholder’s share of the qualified contributions.
Indicate on the attached statement that the individual partner should report
these contributions on line 15b of Schedule A (Form 1040) if the partner makes
this election. For partnerships, identify this attached statement in box
13 of Schedule K-1 (Form 1065) using code T (other deductions). For S corporations,
identify this attached statement in box 12 of Schedule K-1 (Form 1120-S) using
code P (other deductions).
Charitable Contributions of Food Inventory (Act
section 305)
The Katrina Emergency Tax Relief Act of 2005 temporarily extended the
enhanced deduction for certain charitable contributions of food inventory
under IRC section 170(e)(3) to contributions by partnerships and S corporations.
The deduction is limited to donations of food inventory to certain charitable
organizations for the care of the ill, needy, and infants during the period
beginning on August 28, 2005, and ending on December 31, 2005. The food must
meet all the quality and labeling standards imposed by federal, state, and
local laws and regulations.
Amount of Contribution. The amount
of the charitable contribution for donated food inventory is the lesser of (a) the
basis of the donated food plus one-half of the appreciation (gain if the donated
food were sold at fair market value on the date of the gift) or (b) twice the amount of basis of the donated food.
10% net income limitation. The deduction
for contributions of food inventory may not exceed 10% of the partner’s
or shareholder’s aggregate net income for the tax year from all businesses
from which food inventory contributions were made, including the partner’s
or shareholder’s share of net income from the partnerships or S corporations
that made the food inventory contributions.
Reporting on Schedule K-1 for partnerships and
S corporations. If a partnership or S corporation has any qualified
food inventory contributions, it must attach to Schedule K-1 (for the 2004-2005
fiscal tax year) a statement providing the following information.
-
The partner’s and shareholder’s share of the amount of the
charitable contribution (see Amount of contribution above)
for qualified food inventory that was donated to charitable organizations
during the period beginning on August 28, 2005, and ending on December 31,
2005.
-
The partner’s and shareholder’s share of the total net income
for the tax year from the partnership’s or S corporation’s business
activities from which the contributions of food inventory were made.
For partnerships, identify this attached statement in box 13 of Schedule
K-1 (Form 1065) using code T (other deductions). For S corporations, identify
this attached statement in box 12 of Schedule K-1 (Form 1120-S) using code
P (other deductions).
Internal Revenue Bulletin 2005-48
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