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5. The organization must write a statement saying that it will comply with the 3 previous requirements.

As an example, let’s assume a business is donating qualifying food inventory with a basis of $10,000. If the food was sold (rather than donated) for a FMV of $15,000, the ordinary income amount would be $5,000. By following the calculation outlined above, we can say that the deduction is equal to the lower of: (a) 10,000 + (½ * 5,000) = $12,500, or (b) 10,000 * 2 = $20,000 In this example, the total charitable deduction would be $12,500. If this were nonqualifying inventory, the deduction would be limited to the basis of $10,000. Because of this, the additional EDDF is $2,500. It is also important to note that this deduction is limited to 15% of net income as of 2022 (as opposed to 25% in 2021).

6. Finally, the donated food must comply with the Federal Food, Drug, and Cosmetic Act and the organization cannot be a private nonoperating foundation. Rather than deducting the basis of these contributions like other nonqualifying inventory, businesses that satisfy these criteria are allowed a deduction equal to the lower of: “(a) the basis of the contributed inventory-type property…plus one-half of the ordinary income… that would have been recognized if the property

were sold for fair market value…or (b) twice the basis of the property.”3


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