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

moneybags

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 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

Review of Income Tax Deduction Rules for Charitable Gifts

According to area newspaper the St. Louis Post Dispatch, one of St. Louis’ wealthiest families, that of Enterprise Holdings founder Jack Taylor, is making some very large charitable donations this week–a total of $92.5 million to 13 cultural institutions and charities, most local to St. Louis.

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

Section 170 of the Internal Revenue Code (the “Code”) governs income tax deductions for charitable contributions. In the case of an individual making a cash gift to a Section 501(c)(3) organization classified as a “public charity” (such as churches, schools, hospitals, and governmental units), the gift is deductible for federal income tax purposes so long as the aggregate gifts do not exceed fifty percent (50%) of the taxpayer’s adjusted gross income (“AGI”) for the taxable year.

Nontaxable IRA Transfers to Eligible Charities Extended – Less Than Two Weeks Left!

On Dec. 16, 2014, Congress passed the “Tax Increase Prevention Act of 2014, (“TIPA”, or “the Act”), which the President has now signed into law. The Act extends a host of individual tax provisions, including non-taxable IRA transfers to eligible charities.

Taxpayers who are age 70 ½ or older can make tax-free direct distributions to a charity from an Individual Retirement Account (IRA) of up to $100,000 per year.  These distributions aren’t subject to the charitable contribution percentage limits since they are neither included in gross income nor claimed as a deduction on the taxpayer’s return.  Under pre-Act law, these rules didn’t apply to distributions made in tax years beginning after Dec. 31, 2013.  TIPA retroactively extends this provision for one year so that it’s available for charitable IRA transfers made in tax years beginning before Jan. 1, 2015.  Therefore, there are less than two weeks to complete a charitable IRA

Don’t Get Stuck With a Non-Deductible Conservation Easement

Don’t Get Stuck With a Non-Deductible Conservation Easement

October 3, 2014

Authored by: Andrew Bleyer and John P. Barrie

conservationThe increasingly popular conservation easement charitable deduction allows a landowner to deduct a portion of the value of a piece of land by limiting the land’s use.  In a typical scenario, a landowner records a conservation easement on the land and then donates the conservation easement to a conservation organization.  The landowner receives an appraisal of the value of (i) the developable land and (ii) the land once the conservation easement has been recorded.  The landowner then deducts the difference as a charitable contribution.  In such a scenario, Section 170 of the tax code allows a deduction as long as the easement is perpetual, made to a qualified organization, and for a valid conservation purpose.

The typical scenario is changing, however, as more and more landowners are holding their property in trust.  When

A 200% Tax on Self-Dealing? And People Think the Estate Tax is High!

With research and drafting assistance provided by our extern from Washington University School of Law, Rachael Lynch.

Now that we’ve scared you with the potentially high taxes for self-dealing in private foundations, what is self dealing?

Self dealing includes any of the following transactions:

Charitable Gifts to Supporting Organizations

With research and drafting assistance provided by our extern from Washington University School of Law, Rachael Lynch.

As we discussed in our prior post, Review of Income Tax Deduction Rules for Charitable Gifts, an income tax deduction up to fifty percent (50%) of the taxpayer’s adjusted gross income is allowed for gifts to public charities of non-capital gain property and up to thirty percent (30%) for gifts of capital gain property. These same contribution limits apply to gifts to supporting organizations.

What is a supporting organization? Supporting organizations are described in Section 509(a)(3) of the Internal Revenue Code as charities that carry out their exempt purposes by supporting other public charities. A supporting organization generally warrants public charity status because it has a relationship with its supported organization sufficient to ensure that the supported organization is effectively supervising or paying particular attention to the operations of the supporting

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