Charitable Transfers Flashcards
What is the income tax deduction for a charitable remainder annuity trust (CRAT)?
Donor receives an income tax deduction for the present value of the remainder interest
Is raw land generally an appropriate investment for a CRAT or a CRUT?
No, because the corpus must pay out a specified amount each year at least 5% raw land may produce no income at all
What is the tax deduction for a charitable lead trust?
Can claim an upfront income tax deduction for the present value of the payment stream distributed to charities
However, future income and gains that the trust generates will be taxable to the grant tour, and the grant tour will not be entitled to any additional charitable deductions for the annual distributions
If the trust is established at death, the estate can take the than present value of the payment stream as an estate tax deduction
What is a charitable gift annuity and what is the difference between a charitable gift an annuity and a CRAT?
Donor transfer cash or other property to a qualified charitable organization in exchange for a commitment by the organization to pay the donor a specified amount each year during the remainder of the donor‘s life
Differences between a CRAT:
Transferred to the charitable organization, not to a trust
Charity receives money now
Value of the property transferred to the charitable organization, exceeds the value of the annuity, guaranteed by the charity. Donor intends to make a charitable contribution in the amount of the excess, and the amount contributed is in an allowable deduction.
The transaction is about simultaneously and acquisition of an annuity and a charitable contribution no 5% role applies
What is the charitable deduction for a charitable gift annuity?
Example you give $1 million to a university in exchange you receive a charitable gift annuity or $750,000. The amount of the deductible charitable gift is the difference $250,000.
Can a pulled income fund, be invested in tax exempt securities?
No
Can a term of years be used for a pulled income fund?
No, must be paid out over life expectancy
Is a pulled income fund subject to the 5% rule
No
Private foundations/ family foundations
Created and controlled by wealthy individuals for family charitable purposes
Not held to the requirements that govern public charities were supporting organizations
Distributes a minimum of 5% of its investment assets each year
Donor has complete control over the amount and recipients
Can be in family over generations
Can distribute tax deductible gifts to non-charitable beneficiaries
Ex exempt from regular federal tax, they are subject to a number of exercise taxes generally pay an excise tax equal to 2% of net investment income 15% penalty is applied if the foundation does not distribute 5% annually
Charitable stock bail out
Gift stock to charity
Charity light tender the stock for cash redemption by the corporation
Advantage bailing out corporate earnings, and profits without incurring dividend income, helping younger family, shareholders, concentrate their ownership, and enable the charity to receive cash
Stockholder and the charity cannot agree to the time or certainty of the redemption
Corporation does not redeem the stock. Redemption of the stock are directly to the stockholder would result in unwanted dividend treatment of the redeemed stock.
What is a charitable bargain sale?
Property is sold to the charity for less than fair market value
Sale must be allocated between the portion of the property sold, and the portion gifted to charity based on the fair market value of each portion
(Sale to charity / fair market value) x basis = amount needed to adjust basis
Sale minus the amount needed to adjust basis equals taxable gain
Is there a required minimum distribution from a CLAT or CLUT?
No, there’s not
That applies to a CRAT and a CRUT
