“when a company contributes inventory to be used by the donee
for the care of the needy, the qualified contribution is reduced by
half of the amount of potential ordinary income if property had
been sold at its FMV”
Petro Company allowable contribution deduction should not exceed
$60000 ($600,000 adjusted taxable income × 10%).
Contributions
$120,000
Less: Potential ordinary income if sold [($120,000 FMV - $70,000
basis) × 50%] $25,000
Contribution
deduction
$95,000
So here, Petro Company can take up to $60,000 as
contribution deduction
I hope this will help you. If requires clarification , you may
comment below.
