Resources for information on the tax rules governing charitable donations.
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.
For insight into other companies' activities, subscribe to Business Ethics, a bimonthly magazine ($25 yearly for new subscribers, $49 after the first year; 612-962-4700).