As chief operating officer, Sara also advises Johnstone Corporation about the us

Question

As chief operating officer, Sara also advises Johnstone Corporation about the uses of small plots of land that they have invested in over time. Sara is in a position to provide a recommendation on donating some land to YSU. Please explain to her the issues relating to the accounting for contributions and how the donation of vacant land would be reported.

Finally, there is a plot of land that she wishes to invest in that is close to the freeway, and would be a good location in terms of shipping and receiving their products. However, there is the concern that the State of Ohio may expand the number of lanes on the interstate. Please explain to her how the State would be able to take control of her property and the subsequent accounting effects to the financial statements. She doesn’t really understand how to account for gains and losses.

Explanation / Answer

Donations are non-deductible expenses as they are not incurred in the production of income.

However, you can claim tax deduction for donations made to an approved Institution of a Public Character (IPC) or to the Singapore Government which benefit the local community (referred to as "Approved Donations"). The tax deduction for Approved Donations is allowed on a preceding financial year basis.

For example, Approved Donations made during the financial year ending in 2014 will be allowed a tax deduction in your tax assessment for the Year of Assessment (YA) 2015.

Claiming Tax Deductions on Approved Donations

The tax deduction for Approved Donations will be automatically reflected in the company's tax assessment based on information from the IPC. A company is required to provide its Unique Entity Number (UEN) to the approved IPC in order to be given a tax deduction on the Approved Donations.

The amount of Approved Donations can be retrieved at the "View Donations" e-Service atmytax.iras.gov.sg. As such, you do not need to state the donation amount in your Income Tax Return (Form C-S/ C). To this end, IRAS has removed the line item "Approved Donations Made During the Financial Year" from Form C from YA 2013 onwards. Form C-S does not include such a line item.

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