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

When appreciated property is transferred to a CRUT, the donor avoids immediate capital gain recognition and receives a charitable deduction equal to the present value of the remainder interest going to charity.

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

A CRAT pays a fixed annuity amount determined at inception, making it independent of the trust's actual investment returns each year.

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

In a CLAT, the charitable organization receives the annuity payments for the trust term, and any remainder passes to the grantor's heirs—opposite of a CRAT's structure.

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

Post-TCJA, cash contributions to public charities are deductible up to 60% of AGI, with excess amounts carried forward for up to five years.

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

A DAF allows donors to contribute assets, claim an immediate tax deduction, and then advise the sponsoring organization on charitable grants over time, though legal control passes to the sponsor.

(AEP) Accredited Estate Planner Practice Test

(AEP) Accredited Estate Planner Practice Test

AEP Charitable Planning & Philanthropy