Muhammad, your client, comes to your office. He is from Pakistan and is an avid

Question

Muhammad, your client, comes to your office. He is from Pakistan and is an avid cricket player. His annual salary and bonus/incentive compensation income, earned as the president of an engineering firm in Virginia, is usually $2 million. He is in the top tax bracket. Muhammad would like to donate $1 million to the Pakistani Cricket Foundation in Islamabad (the foundation is not a U.S. registered charity) to support cricket in his homeland. He assumes he will get an income tax deduction for this. 1. Will Muhammad likely get an income tax deduction for his planned $1 million donation? Why or why not? 2. Should you try to persuade Muhammad to be more patient and make the donation in his will? Why or why not?

Explanation / Answer

1. No, Muhammad can not get income tax deduction of $1 million for payment made to a pakistani cricket club because this pakistani cricket club is not a qualified organisation under section 170(c) of Internal Revenue code for availing tthe tax deduction.

2. If Muhammad want to make donation in his will then it is no taxable. A US citizen can transfer its property under its will to foreign country.

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