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Poof! Tax Concerns That Vanish with Gifts Made upon Death

A donor who is thinking of making certain gifts during life needs to pay attention to various requirements to ensure he can claim an income tax charitable deduction. When the same gifts are made upon death, however, these same requirements do not apply – or at least not in the same way.

Revenue Ruling 2008-41

This ruling provides taxpayers with guidelines on dividing a charitable remainder trust into two or more separate and equal CRTs without violating the provisions of section 664 of the Code. It also provides that, if the division of the CRT is made in accordance with the situations described in the ruling, (i) the division is not a sale, exchange, or other disposition producing gain or loss, the basis under section 1015 of each separate trust’s share of each asset is the same share of the basis of that asset in the hands of the trust immediately before the division of the trust, and, under section 1223, each separate trust’s holding period for an asset transferred to it by the original trust includes the holding period of the asset as held by the original trust immediately before the division, (ii) the division of the CRT does not terminate under section 507(a)(1) the CRT’s status as a trust described in, and subject to, the private foundation provisions of section 4947(a)(2), or result in the imposition of an excise tax under section 507(c), (iii) the division of the CRT does not constitute an act of self-dealing under section 4941, and (iv) the division of the CRT does not constitute a taxable expenditure under section 4945.

Revenue Ruling 2006-58

Charitable remainder trust; real estate investment trust (REIT). This ruling illustrates the application of section 860E of the Code where a charitable remainder trust is a shareholder of a real estate investment trust (REIT) or a partner of a partnership, and the REIT or the partnership has excess inclusion income.

Revenue Ruling 77-374

PG Calc summary
This revenue ruling imposes the 5% probability test for charitable remainder annuity trusts.

IRS Headnote

Charitable transfer; trust remainder; reformed to protect corpus. No deduction is allowable under section 2055 of the Code for a charitable remainder trust that, pursuant to the provisions of section 2055(e)(3), was amended and reformed to meet the conditions of section 20.2055-2(b)(1) of the regulations requiring that only a negligible chance exist that the charitable transfer will not become effective.

Full Text
Rev. Rul. 77-374

Revenue Ruling 84-162

This revenue ruling describes the valuation tables to be used for valuing annuity contracts, including charitable gift annuities. IRS Headnote Valuation; annuity contracts.

Revenue Ruling 86-60

This revenue ruling confirms that the transfer of a life income interest in a charitable remainder annuity trust qualifies for a charitable deduction.

Revenue Ruling 78-197

This revenue ruling establishes that the IRS will treat capital gain realized after the donation of corporate stock to charity as income to the donor only if the charity is legally bound or can be compelled by the corporation to sell the shares.

Revenue Ruling - Definition

A revenue ruling is a ruling published by the IRS on a specific tax question that describes how the IRS will treat the question in the future. All taxpayers may rely on a revenue ruling for guidance.

IRS Election Statement

The election statement provides all the information that the IRS requires of a donor who elects to compute her charitable deduction using an IRS discount rate that is for either of the two months prior to the month of the gift.  The donor must attach the election statement to Schedule A of her federal income tax return for the year of the gift.

Exclusion Ratio

The Expected return and Investment in contract are used to calculate the portion of each annuity payment that will be excluded from income as a tax-free return of principal. This exclusion ratio is calculated by dividing the Investment in contract (the fair market value of the gift less the charitable deduction) by the Expected return (the total amount in annuity payments expected to be returned to the beneficiaries).(1) The exclusion ratio is rounded at three decimal places (one-tenth of one percent).