AEP Charitable Planning & Philanthropy 3

Question 1

An estate planner recommends a Charitable Lead Annuity Trust (CLAT) to a client when interest rates are LOW primarily because:

Accepted Answer

Lower rates increase the projected remainder value passing to heirs if the trust outperforms the §7520 rate

Answer

Lower rates increase the present value of the annuity paid to charity, maximizing the deduction

Answer

Lower rates reduce the IRS §7520 rate, which decreases the value of the charitable lead interest, leaving more for heirs

Answer

Lower rates eliminate capital gains tax on appreciated assets contributed to the CLAT

Question 2

Under the concept of 'bargain sale' to a charity, which of the following correctly describes the tax treatment?

Accepted Answer

Gain is recognized proportionally based on the ratio of the sale price to the fair market value

Answer

No gain is recognized because the transaction is partially charitable

Answer

The entire fair market value is treated as a charitable deduction

Answer

The donor's basis is fully allocated to the sold portion, eliminating all gain

Question 3

Which of the following describes a 'net income with makeup charitable remainder unitrust' (NIMCRUT)?

Accepted Answer

A CRUT that pays the lesser of net income or the unitrust percentage, with a makeup account for deficiencies paid in future years

Answer

A CRUT that pays the greater of net income or the unitrust percentage, with no makeup provision

Answer

A CRUT that pays a fixed annuity from trust income only

Answer

A CRUT that allows the trustee to accumulate all income until the trust terminates

Question 4

A client wants to make a charitable bequest under their will but also wants the estate to retain flexibility to redirect assets to different charities. Which planning technique is most appropriate?

Accepted Answer

Establishing a testamentary donor-advised fund

Answer

Naming a specific charity with a restricted gift agreement

Answer

Funding a private foundation during lifetime

Answer

Using a CLAT as part of the residuary estate

Question 5

For estate tax purposes, a charitable bequest to a qualifying organization reduces the taxable estate because:

Accepted Answer

IRC Section 2055 allows an unlimited deduction for qualifying charitable bequests

Answer

The bequest qualifies for the unlimited marital deduction

Answer

Charitable bequests are treated as lifetime exclusion amounts

Answer

The bequest shifts the tax burden to the charitable beneficiary

Question 6

Which IRS form must a taxpayer file to report a noncash charitable contribution exceeding $500?

Accepted Answer

Form 8283

Answer

Form 5227

Answer

Form 990-PF

Answer

Form 8939

Question 7

A 'conservation easement' donated to a qualified organization can generate a charitable deduction based on:

Accepted Answer

The difference in the property's fair market value before and after the easement restriction

Answer

The original cost basis of the underlying property

Answer

The full appraised value of the underlying land

Answer

A fixed percentage of the property's assessed value for tax purposes