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Q. Can a charitable remainder trust hold closely held stock for more than five years?
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A. Yes, if no charitable deduction such as a gift tax charitable deduction was allowed with respect to the trust payout. If no such deduction was allowed, the excess business holdings provisions of Internal Revenue Code Section 4943 don’t apply to the trust.
Q. Is it all right to fund a charitable gift annuity with closely held stock if everyone anticipates that the donor’s corporation will redeem the stock from the charity for cash?
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A. Yes, but there’s a tax problem for the donor. Under Blake v. Comm’r, the U.S. Court of Appeals for the Second Circuit ruled that the Internal Revenue Service will consider the redemption to be from the donor, which will stick the donor with dividend income. The Second Circuit said it would take this position with respect to closely held stock given to a charity if (1) the stock is redeemed from the charity and (2) the charity provides consideration to the donor for the stock.
Q. If a trustee voluntarily pays trust income to a charity, is the trust taxed for federal income tax purposes on that income?
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A. Yes. The only possible deduction allowed for a distribution of trust or estate income to charity is the charitable deduction allowed under IRC Section 642. And, that deduction is allowed only for income paid to charity pursuant to the governing instrument. A trustee’s voluntary payment, even if authorized, isn’t made pursuant to the governing instrument because that instrument must require the payment.
Q. When is a charitable gift made via credit card deemed made for federal income tax purposes?
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A. The IRS has indicated it’s deemed made on the date the charge is posted to the donor’s account, as shown on the credit card statement.
Q. If a donor makes a $250 charitable gift via credit card and has the pertinent credit card statement, does the donor still need a gift receipt (contemporaneously written acknowledgment) from the donee organization?
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A. Yes, according to Van Der Lee v. Comm’r.
Q. If an individual gives an asset to a charity on the condition that the charity shall return the asset to the individual if the IRS denies a charitable deduction for the gift, is it a federal income tax charitable deduction allowable with respect to the
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A. No. In Graev v. Comm’r, the Tax Court said that the conditional nature of the gift, by itself, precludes a charitable deduction. So much for comfort letters from the charity, assuring the donor of the return of the asset if the IRS denies the charitable deduction.
Q. Under what circumstances do assets passing to charity as the result of a settlement agreement qualify for a federal estate tax charitable deduction?
A. An estate tax charitable deduction is allowed if the agreement is made in good faith, is arm’s length and settles a real controversy. For example, an estate tax charitable deduction was allowed for assets passing outright from the decedent’s estate to charity when the assets passed via an agreement settling a controversy involving a bequest to the charity of a remainder interest in a non-qualified CRT (the charity received the assets in lieu of the non-deductible remainder interest). Revenue Ruling 89-31.