2. During the first year of operation ending December 31, 2014, the corporation incurred the following: Sales $200,000 Operating expenses 150,000 (excludes charitable contribution deduction) Nontaxable income 3,000 Nondeductible expenses 4,000 Capital gains 12,000 Capital losses 15,000 Charitable contributions $6,000 Also, the corporation distributed $9,000 to its shareholders ($3,000 to each shareholder). 5. Calculate the amount of charitable deduction

$2,500

Explanation:

The amount of charitable contribution deduction as stipulated in Section 181 of the Companies Act, 2013 is 5 percent of the net profit of such corporation.

Net Profit = Sales - Operating Expenses

Net Profit = $200,000 - $150,000

Net Profit = $50,000

Amount eligible for deduction = $50,000 * 5%

Amount eligible for deduction = $2,500

So, the amount eligible for deduction is $2,500 even though the Corporation contribute $6,000 as stated in the question.

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