Lifetime transfers
generally get a charitable income tax deduction.
Transfers at death
do not get an income tax deduction.
charities get an unlimited charitable deduction for estate tax on the 706.
A gift tax return is required if
if there is a split gift between a charity and a non charitable beneficiary.
Organizations that generally qualify as a charity
- churches, temples, synagogues
- public parks
- colleges and universities
- United Way
- Boy Scouts & Girl Scouts
- Salvation Army
- American Heart Association
- American Society for Prevention of Cruelty to Animals
Organizations that do not generally qualify as a charity
- Foreign organizations
- For-profit groups
- Homeowners' associations
- Political groups
- Labor unions
- Chambers of Commerce
- Social clubs
- Individuals
- Civic groups
Two types of charities
Public and Private
Public charity
receive broad support from the general public.
- more than one-third of support must be a combo of gifts, grants, contributions, membership fees, and gross receipts from sales
- no more than one-third of support can come from sum of gross investment incom
Private foundation
does not meet the two tests
receives their support from single individual or family
Private operating foundation
- spend at least 85% of their adjusted net income on exempt purpose activities
- asset test, endowment test, or support test must be met
Private nonoperating foundation
- does not meet asset test, endowment, or support test
- most family established foundations
Examples of gifts of services: deductible out-of-pocket expenses
Car expenses- gas and oil, or alternatively the standard mileage deduction at $.14 per mile
Support for foster children in excess of payments received, if no profit motive exists
Travel and transportation expenses incurred in connection with attending a c
Ordinary Income Property Deduction
lesser of adjusted basis or FMV
Capital Gain Property Deduction
FMV
Except basis if
Non-operating foundation - limited to AB
Tangible property for unrelated use - limited to AB
Choosing the AB over the FMV (Special Election)
Donor's current AGI and the projected AGI for next 5 years
FMV of the donated property
AB of the donated property; and TVM
Ordinary Income Property
Property that if sold would result in ordinary income
Ex- inventory, capital assets held year or less, works of art created by donor
Lesser of FMV and AB
Capital Gain Property
Any asset that would have generated a long-term capital gain if the taxpayer had sold the property for its fair market value.
Intangible property, tangible property, and real property
60% Organizations
Public charities
Private operating foundations, and Private nonoperating foundations that distribute their contributions to either public charities or private operating foundations within 2.5 months of their tax year-end
30% Organizations
Frequently referred to as private, non-operating foundations.
Include fraternal associations, veteran's groups, certain cemetery groups, and some other not for profit organizations.
Cash and ordinary income property
LT capital gain property are subject to
Bargain Sales of Property to Charities
Charitable Contribution = Difference between FMV and Purchase Price
Bargain Sales of Appreciated Property to Charities
Capital gain treatment for portion of sale
Charitable Gift Annuity
An agreement between you and a charity to make a gift of cash, stock, or other marketable property in exchange for income payments for the rest of your life. At death, the balance goes to charity.
Gifts of life insurance to charities
The deduction is equal to the lesser of FMV or adjusted basis of the policy.
Theory behind the unlimited marital deduction
The theory is that a married couple should be treated as a single economic unit for estate tax. This is to the extent that either spouse uses property during their lifetime, it should not be subject to estate tax purposes.
Three benefits of the unlimited marital deduction
� Deferred payment of estate tax
� Fund the surviving spouse's applicable estate tax credit.
� Helps to guarantee that the surviving spouse will have enough assets to keep up with the current lifestyle
What are the three requirements for a transfer of property to qualify for the unlimited marital deduction?
� Property must be included in the gross estate
� Property must be transferred to the surviving spouse
� Interest cannot be nondeductible terminable interest
How is a bypass trust used in estate planning?
It is used to ensure that an individual makes the full use of their available applicable credit at his death. The bypass trust does not qualify for the unlimited marital deduction
What is a qualified disclaimer and how is it used?
It allows an individual to refuse property from the estate of the decedent. When it's used, the property will past to the next person eligible to receive the property.
Describe how the portability of exemptions works.
The executor must elect on the deceased spouse's tax return to give the unused exemption amount to the surviving spouse.
Jeremy and Rosa were married forty years ago after meeting on the beaches of Cozumel. Rosa moved to the U.S. with Jeremy, but she never applied for U.S. citizenship. If Jeremy is concerned about using the marital deduction for the fair market value of the
Qualified Domestic Trust (QDOT)
How may a testamentary charitable transfer be more beneficial to a donor than an inter vivos charitable transfer?
The charitable transfer of appreciating property is more beneficial at death than during life because the value of the transfer will be greater as time passes.
Bypass trust
Used to ensure that an individual can make full use of their applicable estate tax credit amount