Tax Credits for Gifts Charities May Never Get

To stop donors from abusing charitable remainder trusts (CRTs) by taking deductions when charities couldn't actually expect to receive anything, the Internal Revenue Service created both the 5 percent exhaustion and the 10 percent remainder rules. My analysis using Monte Carlo simulations shows that the 5 percent rule is almost always ineffective, while the 10 percent rule is reasonably effective.

To stop donors from abusing charitable remainder trusts (CRTs) by taking deductions when charities couldn't actually expect to receive anything, the Internal Revenue Service created both the 5 percent exhaustion and the 10 percent remainder rules. My analysis using Monte Carlo simulations shows that the 5 percent rule is almost always ineffective, while the 10 percent rule is reasonably effective. The IRS should repeal the 5 percent rule and treat all CRTs equally. If the IRS doesn't, a donor

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