Stephen Murphy is proof that you can be entrepreneurial and philanthropic at the same time. While his Los Angeles real estate investment firm, American Capital Investments, has grown to $50 million in assets in just a few years, Murphy, once a homeless Vietnam War veteran, has done more than donate cash to charities. He has used his contacts and management expertise to buy housing for other homeless vets.

Rarely can a charitable donation be structured so that the tax benefits wipe out its cost. For example, for a corporation in the 34% tax bracket, a $10,000 donation costs $6,600 after taxes. But deals can be structured to minimize cash-flow costs, as Murphy can show. In one case, he bought a run-down house for $127,000. "The cash outlay was $5,000 for the down payment,' he explains. But he gained tax deductions for that outlay and for mortgage-interest payments.

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For an update on the tax rules governing charitable donations, see "Instructions for Forms 1120 and 1120-A,' free from the IRS. They're complex but accurate. To order, call 800-TAX-FORM.

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