Hi all, One of my Corporations (Closely held C Corp) just dropped off their info for TY2021. They typically do almost no business and have very little gross receipts. However, last year our community experienced a very bad wildfire, and this Corporation opened up its land to house refugees and livestock.
In the course of this, they accepted a large (for this Corp) sum of money as donations, and in looking over their expenses for the year distributed most of the funds (~90%) as direct payments to individuals directly affected by the fire.
They've broken out all of the expenses paid from donations, separating this activity from normal business on their income statement. Between the direct pay-outs to fire victims and the expenses of portable toilets, water, and food, expenses exceed the amount received, so the Corp did not receive any benefit from this apart from maybe some community goodwill. But, considering that most of their income is from leasing grazing land, I don't see how goodwill actually benefits this particular corp.
My knee-jerk reaction is to functionally ignore it. Treat the donations received and then paid out as gifts, and to treat expenses for this endeavor in excess of donations received as more gifts with no tax treatment (all transactions are below the gift tax threshold). Does anyone see a major issue with this? Thanks in advance!