Assignment - Deductions In Charitable Contributions | Section 170
Added on - 22 Sep 2019
Question 11.A deduction is allowable to an individual under section 170 only forcharitablecontributionsactually paid during thetaxable year, regardless of when pledged andregardless of themethod of accountingemployed by thetaxpayerin keeping his booksand records. A contribution to an organization described in section 170(c) is deductibleeven though some portion of the funds of the organization may be used in foreigncountries for charitable or educational purposes. The deduction by an individualforcharitable contributionsunder section 170 is limitedgenerallyto 20 percent ofthetaxpayer's adjustedgross income(computed without regard to anynet operatinglosscarryback to thetaxable yearunder section 172).2.This is governed by section 170(c) (2) (A). Under this section Charitable contribution isdefined as a contribution,or gift to or for the use of—3.(1)A State, a possession of the United States, or any political subdivision of any of theforegoing, or the United States or the District of Columbia, but only if the contribution orgift is made for exclusively public purposes.4.(2)A corporation, trust, or community chest, fund, or foundation—(A)created or organized in the United States or in any possession thereof, or under thelaw of the United States, any State, the District of Columbia, or any possession of theUnited States;(B)organized and operated exclusively for religious, charitable, scientific, literary, oreducational purposes, or to foster national or international amateur sports competition(but only if no part of its activities involve the provision of athletic facilities orequipment), or for the prevention of cruelty to children or animals(C)no part of the net earnings of which inures to the benefit of any private shareholder orindividual; and
(D)which is not disqualified for tax exemption under section 501(c)(3) by reason ofattempting to influence legislation, and which does not participate in, or intervene in anypolitical campaign on behalf of (or in opposition to) any candidate for public office.5.In the present case Susan has contributed $10000 to EI Salvador Relief fund, which isorganized in San Salvador. This fund is used to provide basic necessities to the victims ofthe Mexican fires like food, shelter, clothes etc.6.EI Salvador/ San Salvador is a small Central American Nation. The trust is registered inthis nation only. So it is covering under the definition of the charitable contribution undersection 170 (c)(2)(A).7.Since it is meeting the condition of the section that the fund is registered in US, it doesnot matter where the fund is utilizing its money. Whether it is spending money for thewelfare of US or for the welfare of any other country.8.In the present case, this particular fund is spending money for Mexican fires. Despite ofthis fact, Susan is eligible for the deduction as per section 170.9.References: non, (2017). [online] Available at: http://26 CFR 1.170-2 - Charitabledeductions by individuals; limitations (before amendment by Tax Reform Act of 1969).[Accessed 24 Oct. 2017].
Question 21.Every employee who, in the course of his employment by an employer, receives inany calendar month tips which are wages (as defined in section 3121(a) or section3401(a)) or which are compensation (as defined in section 3231(e)) shall report allsuch tips in one or more written statements furnished to his employer on or before the10th day following such month.2.If the tax imposed by section 3101 or section 3201 (as the case may be) with respectto tips reported by an employee pursuant to subsection (a) exceeds the tax which canbe collected by the employer pursuant to section 3102 or section 3202 (as the casemay be), the employer shall furnish to the employee a written statement showing theamount of such excess.3.In the case of a large food or beverage establishment, each employer shall report tothe Secretary, at such time and manner as the Secretary may prescribe by regulation,the information regarding the tips along with other information with respect to eachcalendar year.4.(D)The sum of—(i)the aggregate amount reported by employees to the employer under subsection (a),plus(ii)the amount the employer is required to report under section 6051 with respect toservice charges of less than 10 percent.5.For purposes of paragraphs (1)(E) and (2)(C), the employer of a large food orbeverage establishment shall allocate (as tips for purposes of the requirements of thissubsection) among employees performing services during any payroll period whocustomarily receive tip income an amount equal to the excess of:—6.(i)8 percent of the gross receipts (for allocable receipts) of such establishment for thepayroll period, over
7.(ii)the aggregate amount reported by such employees to the employer undersubsection (a) for such period8.For purposes of this subsection, the term “large food or beverage establishment”means any trade or business (or portion thereof)—(A)which provides food orbeverages,(B)with respect to which the tipping of employees serving food orbeverages by customers is customary, and(C)which normally employed more than 10employees on a typical business day during the preceding calendar year.9.Rulings-Rev. Proc. 2005–41, page 9010.The Fresh cut employs more than 30 waiter/ waitresses. Thus it meets the criteria of falling inthe definition of large food or beverage establishment.11.Form W-2 is filed by an employer for each of his employees (who provides services to hisemployer) who pays remuneration including non-cash payments of $600 or more.12.As per section, employer will show the excess of the tips actually received which is reportedby employee to employer or 8% of the allocable receipts. Thus, if $2400 is excess of both ofthe above conditions then employer has shown the right amount.13.References: Anon, (2017). [online] Available at: http://26 U.S. Code § 6053 - Reporting oftips [Accessed 24 Oct. 2017].