GS 849 Flashcards
For an undivided partial interest of real estate, what happens if the donor is not in the process of transferring the gift completely within 10 years?
The deduction is recaptured as taxable ordinary income to the donor with a 10% penalty tax.
Statements of value from the IRS are available for works of art appraised at how much and more?
$50,000
For a noncash gift, what amount and greater does a donor file IRS Form 8283?
$500
For gifts of non-publically traded securities, for what amount and for what greater is an appraisal needed?
$10,000
For noncash gifts other than art or non-publically at what amount or greater is an appraisal needed?
$,5000
For gifts of art, for what amount and greater is an appraisal needed?
$20,000
For noncash gifts at what amount or greater does the nonprofit sign the 8283?
$5,000
Donee organizations must file what form if they sell, exchange, consume, or dispose of charitable deduction property within three years after receiving it?
Form 8282
A qualiified appraisal must be made not more than
how many days before the date of the contribution.
60
What are examples of Adjustments to gross income (“Above the Line Deductions”) that results in adjusted gross income?
Contributions to traditional and Roth individual retirement arrangements (IRAs); alimony; student loan interest; business expenses, etc.
What are examples of Ordinary income property deductible at basis?
- Inventory held for sale in a business
- Life insurance
- Deferred annuities
- Short-term capital gain property
- Property created by donor
What is the AGI limitation for a donation of ordinary income property?
50%
What is the deduction for a donation of ordinary income property either to public or private charity?
Lesser of FMV or cost basis
For a gift of long-term capital gain property to a private charity, the deduction is limited to what unless gift is of qualified appreciated stock (i.e., publicly traded)?
Cost basis
Tangible property unrelated to the recipient organization’s tax-exempt purpose is deductible up to what % of AGI when given to a public charity?
50%
When the property given for use by the charity in its
exempt purpose is sold by the charity within 3 years, what is recaptured by the taxpayer?
The difference between the deduction for FMV and for basis
An election is available whereby a donor can reduce the amount of the deduction for long-term capital gain property to basis. If the election is taken, the deduction limit is what percent of AGI?
The election must apply to all such property gifted in a tax year.
50%
T or F: Estate tax charitable deductions are not subject to percentage limitations?
True
According to Giving USA 2020, how much does total giving go to bequest?
10%
T or F? Ordinary income property, such as the gain in a deferred annuity or the value of an IRA or other qualified plan interest has stepped-up basis after someone dies
False
T or F? If the gift is left to the executor’s discretion or occurs by operation of the state intestacy laws, the deduction is not available.
True
A CRUT can pay out to a maximum of what?
50%
CRATs shift the investment risk where?
To the remainder beneficiary
What is Rescission?
Undoing a CRT through court action
Why is the payout higher for Commercial Single Premium Income Annuities (SPIA)?
Because there is no charitable element
For a CLAT, payment to charity can be specified by a term of years or based on what?
A life or lives in being at the inception of the CLT.
T or F. CLAT charitable beneficiaries can include supporting organizations, Donor-advised funds, and Private foundations.
True
Gift of Debt-encumbered Property. The loan results in what for the donor?
Income
T or F. A Grantor CLT is an entity that pays its own income tax.
False
What are the factors in calcuating the remainder interest of a retained life estate?
- Age of donor(s) or term of the agreement
- Value of the building, its useful life, and its salvage value
- Value of the land
- 7520 rate (used as discount rate)
What is the charitable deduction of a retained life estate?
FMV - present value of retained life estate
T or F? The transfer of a retained life estate is made through a trust.
False. It’s made through a deed.
What is that carry forward for a qualified conservation easement?
15 years?
What is the AGI for a qualified conservation easement
50% or 100% for qualified farmers
T or F. There is a tax benefit for a charitable LLC
false
T or F. A Grantor CLT is allowed an income tax deduction for payments made to charity.
False
T or F. The grantor of a Grantor CLT reports and pays taxes on trust distributed to charity,
True
T or F. A qualified CLT (that is, a CLT qualified to count as a CLT for tax
purposes) is not irrevocable.
False
For a paid-up life insurance policy, the deduction is equal to what?
to the lesser of the replacement cost
or adjusted basis.
What is a terminal reserve for a whole life insurance policy?
This is the amount of money the insurance company sets aside to pay the death claim. For whole life policies, it grows predictably each year based on guaranteed premiums and cash values
Generally, how is basis in a life insurance policy computed?
Essentially, basis is what the client paid minus what client has already received in
cash by way of dividends, if any.
What is the deduction amount for a bargain sale?
The deductible amount is what the charity gets minus what the donor receives
T or F. With respect to giving appreciated S corp stock to a DAF The tax paid by the DAF can be minimized if the DAF sponsor is set up as a trust rather than as a
corporation.
True
The correct answer is C. Both are true. There is an old saying, “Make a law, make a business.” There are
now providers of DAFs who specifically target gifts of S Corporation stock. If such stock is given to a
charity that is established as a corporation, the “shrinkage” due to tax paid by the charity upon sale can be
35% of the value of the stock. Likewise, any flow-through income is taxed at a high corporate rate. But if a
DAF is under a charity that has been established as a trust, then the rates paid are much lower. Also, the
DAF gets a deduction for payments made to charities. The point to remember for practical work with
clients is that a direct gift to charity or to a DAF established under a corporate form can result in shrinkage
up to 35% of the gain upon sale. Using a DAF set up under a trust can reduce that tax. And, using a DAF
can be more efficient than a direct gift of the stock to charity because the DAF can get an offsetting
deduction for gifts it makes to the charity.
While all this may seem “technical,” the points are worth reflecting upon by both nonprofit gift planners
and advisors. If the charity is willing to “detour” the gift via a DAF, then the dollars received by the charity
may be greater. The “detour” via the DAF also lets the charity outsource the hard work and the liability of
accepting difficult-to-value assets like S Corporation stock. The charity also avoids the hassle and expense
of calculating the taxes due. And the charity can avoid the slow-motion process of convening the gift
acceptance committee and making a decision. Often, donors contemplating a sale of a closely held
business do not have a lot of time as the deal comes together. A DAF company that specializes in such
transactions may be able to move faster. From an advisor’s point of view, it is easier to get paid on assets
under management via a DAF than in a direct gift to charity. Will this emerge, then, as a focus for
collaboration among CAPs? The case studies from Bryan Clontz are meant to highlight this potential
opportunity.
What is the deduction of a paid-up life insurance policy to charity?
A paid-up policy is valued for charitable gift purposes at
replacement value, but the gift value is limited to basis, if basis is less than replacement cost. Also, be
T or F. QCDs can go into DAFs
False
T or F. DAFs can accept patents
True
What is a designated fund at a community foundation?
An endowment to hold assets permanently for a named charity
What are the four community foundation operating models
donor focused, grant focused, fiscal agent, and leadership.
What is the initial penalty for self dealing with a private foundation and what can it rise to?
10% initially based on the amount involved and can rise to 200%
Excess business holdings for a private foundation are triggered if a private foundation owns more than what percentage of voting stock of a business?
20%
What is the five-year rule for private foundations and SOs?
If the PF or SO receives closely held stock by gift or
bequest, tax is not imposed until 5 years (10 years with an
IRS extension) after receipt.
If a private foundation makes a taxable expenditure, it must do what?
Pay an excise tax
T or F. Private foundation program related investments can be made to noncharitable, non-exempt entities and do count toward the 5% payout requirement
True
T or F. A private foundation’s mission-related investments are a charitable activity
False.
T or F. Governance of a supporting organization is carried out by family members.
False. Governance is conducted by nonfamily members,
T or F. A donor can name a supporting organization.
True
T or F. Income tax and estate tax
deductions are both allowed for gifts to the U.S., a state, or a political subdivision, if used for a public
purpose.
True
