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The Effect of Tax Changes On Transfers from IRAs to Charity

The Tax Cuts and Jobs Act of 2017 (TCJA) eliminated all miscellaneous itemized deductions that are subject to the 2% floor, capped state and local taxes deduction at $10,000, and doubled the standard deduction for single persons to $12,000 and married couples to $24,000.  As a result of this triumvirate of changes, the individual taxpayer who is over age 70½ is now faced with new computation to make to determine how best to report deductions on the Form 1040 beginning this year and a new opportunity, if managed correctly, to maximize deductions and minimize taxable income.

 

IRC § 408(d)(8) permits anyone who is over age 70½ to transfer up to $100,000 per year from his/her IRA directly to public charities without reflecting the distribution in taxable income on the taxpayer’s Form 1040.  This technique allows the IRA owner to satisfy the taxpayer’s charitable giving and his/her Required Minimum Distribution

More Scrutiny of Donor Advised Funds

More Scrutiny of Donor Advised Funds

December 8, 2017

Authored by: Keith Kehrer

Notice 2017-73, released on December 4, 2017, describes potential approaches that may be taken to address issues raised regarding the use of donor advised funds (“DAF”). The Treasury and IRS are considering developing proposed regulations under § 4967 of the Internal Revenue Code (Code) that would, if finalized, provide that: (1) certain distributions from a DAF that pay for the purchase of tickets that enable a donor, donor advisor, or related person to attend or participate in a charity-sponsored event result in a more than incidental benefit to such person under § 4967; and (2) certain distributions from a DAF that the distributee charity treats as fulfilling a pledge made by a donor, donor advisor, or related person, do not result in a more than incidental benefit under § 4967 if certain requirements are met. In addition, the Treasury Department and the IRS are considering developing proposed regulations that would

Benefactors Beware: Fake Charities Included in IRS List of Top Tax Scams for 2017

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Written by Emily Manns and originally posted on BryanCaveCharityLaw.com

Every year, the IRS issues its “Dirty Dozen” Tax Scams list, a compilation of tactics and devices used by scam artists against taxpayers.  While the threat exists year-round, the IRS promulgates the list ahead of filing season. As susceptible taxpayers prepare their returns, they face a higher risk of being targeted.

Charitable Income Tax Deductions: The Rockefeller Edition

rockefeller-center-midtown-west--new-york-city-new-york-usa_mainBillionaire David Rockefeller passed away this week at the age of 101.  According to Forbes magazine, during his lifetime, the well-known philanthropist gave away nearly $2 billion.

In light of this newsworthy charitable donation, we thought now would be a good time to remind everyone of some of the basic income tax deductions available for gifts to charities.

IRS Updates Form 990-EZ and New Options to Help Exempt Organizations Avoid Errors

February 1, 2017

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Bryan Cave’s Tax Exempt and Charitable Planning Team posted the following:

WASHINGTON — The IRS announced today the release of an updated Form 990-EZ, Short Form Return of Organization Exempt From Income Tax, that will help tax-exempt organizations avoid common mistakes when filing their annual return.

The updated Form 990-EZ includes 29 “help” icons describing key information needed to complete many of the fields within the form. The icons also provide links to additional helpful information available on IRS.gov. These “pop-up” boxes share information to help small and mid-size exempt organizations avoid common mistakes when filling out the form and filing their return.

“We’ve been reviewing the areas of the form where exempt organizations encounter the most trouble,” said IRS Commissioner John Koskinen. “One out of three paper filers has an error on their form. After reviewing these trouble spots, we developed this new option to help groups

IRS Provides Sample Language for “Qualified Contingency” to Meet “Probability of Exhaustion Test”

One of the many requirements that a trust must meet in order for it to qualify as a Charitable Remainder Annuity Trust (“CRAT”) is the “Probability of Exhaustion Test”.  This test applies to CRATs whose annuity term is based on one or more lifetimes, and requires the likelihood that the charitable remainder beneficiary will not receive its interest in the trust be 5% or less.  If a trust fails the test, then the charitable remainder interest does not qualify for income, gift, or estate tax charitable deductions, and the trust is not exempt from income tax.

Review of Income Tax Deduction Rules for Charitable Gifts

 

People.com is reporting that Amber Heard, who received a $7 million settlement in her divorce from Johnny Depp this week, is donating the entire $7 million settlement to charities with “a particular focus to stop violence against women” as well as the Children’s Hospital of Los Angeles.

In light of this newsworthy charitable donation, we thought now would be a good time to remind everyone of some of the basic income tax deductions available for gifts to charities.

Treasury Green Book Proposals — Charitable Contribution Deduction Limitations

The Department of the Treasury has released the Treasury Green Book  for Fiscal Year 2017, which provides explanations of the President’s budget proposals.  One such proposal (remember…these are just proposals, not actual changes in the law) that may affect your estate planning, if passed, is found on page 252 of the Green Book and is re-printed here for your convenience:

CONSOLIDATE CONTRIBUTION LIMITATIONS FOR CHARITABLE DEDUCTIONS AND EXTEND THE CARRYFORWARD PERIOD FOR EXCESS CHARITABLE CONTRIBUTION DEDUCTION AMOUNTS

Current Law

Current law limits the amount of charitable contribution deductions a donor may claim to a share of the donor’s contribution base (the taxpayer’s AGI computed without regard to any net operating loss carryback for the taxable year). An individual taxpayer may generally deduct up to 50 percent of his or her contribution base for contributions of cash to public charities, and up to 30 percent for cash contributions to

Treasury Green Book Proposals — Private Foundations

The Department of the Treasury has released the Treasury Green Book  for Fiscal Year 2017, which provides explanations of the President’s budget proposals.  One such proposal (remember…these are just proposals, not actual changes in the law) that may affect your estate planning, if passed, is found on page 240 of the Green Book and is re-printed here for your convenience:

REFORM EXCISE TAX BASED ON INVESTMENT INCOME OF PRIVATE FOUNDATIONS

Current Law

Private foundations that are exempt from Federal income tax generally are subject to a two percent excise tax on their net investment income. The excise tax rate is reduced to one percent in any year in which the foundation’s distributions for charitable purposes exceed the average level of the foundation’s charitable distributions over the five preceding taxable years (with certain adjustments). Private foundations that are not exempt from Federal income tax, including certain charitable trusts, must

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