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23 Cards in this Set

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What do you use to check for exemption status of an charitable organization?
One of the following.

1. Exemption letter
or
2. Pub 78
or
3. Guidestar
Donor Advised Fund versus Private Foundation
Include all of these.

a. 0 cost of establishing and administering

b. receive the maximum tax deduction available

c. maximum tax deduction is received by the donor at the time of the gift

d. Foundation make grants to other public charities upon the DONOR'S RECOMMENDATIONS

ex: Community Foundation


http://www.austincommunityfoundation.org/?nd=vs
Charitable
Remainder

Unitrust
Charity gets the REMAINDER of the trust (when current beneficiary dies).

Unitrust, the annual payment to you must be a FIXED % of the market value of a trust's assets as determined each year or, alternatively, the lesser of 5 percent of such value or the trust's income. You can see that there are no guarantees of the specific amount you will receive. Your payments will depend upon the changing values of the trust property or income from year to year.
Charitable
Remainder

Annuity

Trust
Using an Annuity trust, the trust specifies an annual amount (fixed amount) to be paid to you. This guarantees that you will receive a specific amount which you can depend upon every year.
Charitable Remainder Trust – Potential Benefits
Eliminate Capital Gains Tax
Tax deductible transfers to trust
Trust income can be significantly greater than income generated outside trust
You choose duration of income from trust
Increased retirement income
Eliminate estate tax on trust assets
Preserve estate for family heirs through survivorship policy funded with added income
Provide charitable bequests to the causes of your choice
Those Who Would Benefit Most From a CRT May Have Some of the Following Characteristics
Own highly appreciated assets
Would like to reposition such assets
Are in a high income tax bracket
Are subject to estate tax at death
Have philanthropic desires
Types of Split-Interest (aka Hybrid) Trust
Charitable Lead Trusts

Charitable Remainder Annuity Trusts

Charitable Remainder Unitrusts

Pooled Income Fund
Annuity Trust versus Unitrust
Annuity Trusts pay out a SET sum every year which is equal to at least 5% of the FMV of the initial trust assets.

Unitrusts pay out at least 5% of the FMV of trust assets.
Pooled Income Trust
Under a Pooled Income Fund the charity is BOTH the trustee AND the charitable beneficiary. The donor will donate property specifying that the income from the property will go to himself and/ot other person(s) and upon their death, the corpus will be distributed to the charity. It is called a pooled income fund, because the charity will "pool" the donations from a number of different donors into one fund. This avoids the expenses of maintaining different trusts, as the charity is usually the trust creator. The biggest difference is that the trust must distribute ALL of the income currently, not just a set amount or set percentage. If it does not distribute all of its income then the excess will be taxed at the regular trust tax rates.
Deduction
Long-Term Capital Gain Property

The full fair market value of long-term capital gain property is deductible to the extent of 30% of Trustor’s contribution base if the charities are required to be public charities or 20% if the trust permits the charities to be a private non-operating foundation
Additional contribution into CRT
Unitrust - fixed % - yes

Annuity - fixed amount - no
CLT and income tax deduction
If a lead trust is structured as a grantor trust, the grantor will receive an income tax deduction in the year of creation for the Present value of the annuity or unitrust interest, but then must pay tax on income earned by the trust in subsequent years,
CLT and income tax deduction

The charitable income tax deduction associated with the creation of a charitable lead trust depends on your relationship to that trust.
The charitable income tax deduction associated with the creation of a charitable lead trust depends on your relationship to that trust.

If the Internal Revenue Service considers you to be the “owner” of the trust, you will be eligible for a charitable income tax deduction in the year you create the trust equal to the present value of the Library Company's income stream. You will also be required each year to include any income earned by the trust in your income.

If you are NOT the “OWNER” of the trust, you will not be eligible for a current charitable income tax deduction, but you will not include the trust's income in your own. This consequence is particularly useful to a person who wishes to contribute amounts in excess of the allowable deduction levels for income tax purposes.
taxation of income distributed to non-charitable beneficiaries of split-interest trust
1. Ordinary Income

As ordinary income to the extent of the trust's ordinary income for the year and undistributed income for previous years

As capital gain to the extent of the trust's capital gain for the year AND undistributed capital gain from previous years.

ONLY differed capital gain on contributed property, NEVER eliminated.
Income Tax Charitable Deduction
Depends on whether trust is Grantor Trust or Non-Grantor trust.
Min Dist Requirement for Private Non-Operating Foundation
The general is that the foundation must pay out its minimum investment return, 5%.

Less 2% net investment income tax and UBIT

Less any approved set-asides.
Penalty for not doing so?

Excise tax up top 30% for amount not distributed.
Tax and CRT
CRT is exempt from income tax even though it may have undistributed net income.

CRT must pay 100% excise tax on unrelated business taxable unrelated business taxable income (UBTI).
Stock holding in CRT and private foundation
CRT can be funded with stock in a closely held company or another unusual investment.
Taxation on CRT and CLT
Unlike a CRT, a CLT is NOT exempt from taxation, and

the TTEE must file a fiduciary income tax return (Form 1041) each year.
Charitable Income Tax Deduction for gifts

DIRECT contribution to Public Charities, or Private Operating Foundation

Cash/STG property
Cash - 50% x AGI or Base

Ex: Base is 100kx 50% = 50k
Contribution is 25k.

25k is fully deductible
Remain
25k can be carry over 5 years.
Carry-overs are included in Base.
Charitable Income Tax Deduction for gifts

DIRECT contribution to Public Charities, or Private Operating Foundation

LTG property
30%
Charitable Income Tax Deduction for gifts

DIRECT contribution to Private Non-Operating Foundation

Cash/STG Property
30%
Charitable Income Tax Deduction for gifts

DIRECT contribution to Private Non-Operating Foundation

LTG Property
20%