AEP Charitable Planning & Philanthropy

Question 1

A donor transfers appreciated stock worth $500,000 (cost basis $50,000) to a charitable remainder unitrust (CRUT). What is the immediate income tax consequence to the donor?

Accepted Answer

The donor receives a charitable income tax deduction for the present value of the remainder interest

Answer

The donor recognizes a $450,000 capital gain immediately

Answer

The donor receives a deduction equal to the full $500,000 fair market value

Answer

No tax consequence occurs until distributions are made from the CRUT

Question 2

Which type of charitable trust pays a fixed dollar amount to the income beneficiary each year regardless of the trust's investment performance?

Accepted Answer

Charitable Remainder Annuity Trust (CRAT)

Answer

Charitable Remainder Unitrust (CRUT)

Answer

Charitable Lead Annuity Trust (CLAT)

Answer

Charitable Lead Unitrust (CLUT)

Question 3

A Charitable Lead Annuity Trust (CLAT) differs from a Charitable Remainder Annuity Trust (CRAT) primarily in that:

Accepted Answer

A CLAT provides the annuity stream to the charity first, with the remainder passing to heirs

Answer

A CLAT eliminates all estate taxes on the transferred assets

Answer

A CLAT requires the grantor to be at least 60 years old

Answer

A CLAT must be funded only with cash, not appreciated property

Question 4

Under IRC Section 170, what is the AGI limitation for a cash contribution to a public charity by an individual taxpayer in a typical tax year?

Accepted Answer

60% of AGI

Answer

30% of AGI

Answer

50% of AGI

Answer

100% of AGI

Question 5

A donor-advised fund (DAF) allows the donor to:

Accepted Answer

Take an immediate charitable deduction and recommend grants to charities over time

Answer

Retain legal control over the assets and direct specific investments

Answer

Receive an income stream from the fund for life before distributions to charity

Answer

Avoid gift tax on transfers exceeding the annual exclusion amount

Question 6

Which of the following is a key advantage of using a private foundation rather than a donor-advised fund for charitable giving?

Accepted Answer

Private foundations allow greater control and the ability to employ family members

Answer

Private foundations have lower administrative costs

Answer

Private foundations offer a higher AGI deduction limit for cash contributions

Answer

Private foundations are not subject to self-dealing rules

Question 7

For a Qualified Charitable Distribution (QCD) from an IRA to qualify for exclusion from gross income, which requirement must be met?

Accepted Answer

The distribution must not exceed $100,000 per year per taxpayer

Answer

The IRA owner must be at least 59½ years old

Answer

The charity must be a private foundation

Answer

The IRA must have been open for at least five years