Ferguson Home Donation Case Study

The Ferguson family contended that since the broker was acting as an agent for the as well as the charity, the date of delivery of stock was in August. The regulation states that the date of delivery of stock is the time of delivery. The court rejected the defense, and the gift completion date was found to be September 9th. The stock had ripened from interest due to a fixed right to receive cash. Since half of the stock had been tendered, it was deemed that the merger would be completed. Since the Ferguson family still had control of the stock, they were responsible to pay tax on the gain. There was an attempt to manipulate the date to evade the taxes. By law taxpayers have the right to avoid taxes by taking the least costly path, but it …show more content…
According to the related use rule, in order for the deduction to be based on the FMV, the charitable organization has to use the gift for its 501(c) tax exempt purpose (Toce). If it is not being used for its main purpose or had been sold, then the deduction is limited to its cost when it was purchased and reduced by any long term capital gain acquired by the property. This often applies to donations of works of art. If donated to a museum to be shown on display then it follows the rule and the FMV is the deduction. As long as the donor genuinely thinks the gift is being used for the exempt purpose, then the fair market value can be the deduction. That being said, donors should always get a written documentation from the charity that states the expected purpose of the …show more content…
This can be done in two possibilities of policies; a “paid up policy” having no premiums due, and one in which premiums still have to be paid (Toce). With a paid up policy, the deduction is limited to the replacement value as a sale would yield a long term gain. However, if the value exceeds the donor’s tax basis with, the deduction is limited to basis. In a policy in which premiums still have to be paid, the FMV and deduction are approximated by the interpolated terminal reserve value. The value still cannot exceed the donor’s tax basis in the policy. If the donor continues to make payments on the policy, a contribution deduction is allowed for the payments (Toce). Efforts had been made to name a charitable beneficiary, but does not yield an income tax deduction because there is no relinquishment of ownership. Life insurance policies can also be provided group term by an employer. Up to $50,000 can be provided free of tax with the employer allowed a deduction for the premium and the employee realizing no taxable income. If more than $50,000, the employee recognizes taxable income for the excess coverage. However, a charitable organization can be named as a sole beneficiary on the excess amount over $50,000, to avoid the taxable income and allow for a contribution without cash outlay