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Charitable Giving Strategies Flashcards

7 cards from real CEA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

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  1. A Charitable Gift Annuity (CGA) differs from a Charitable Remainder Trust primarily because:

    Answer: A CGA is a contract between the donor and the charity, not a trust arrangement

    A CGA is a simple contractual arrangement directly between the donor and the charity, whereas a CRT is a separate trust entity with its own legal existence.

  2. What is the primary difference between a Charitable Remainder Annuity Trust (CRAT) and a Charitable Remainder Unitrust (CRUT)?

    Answer: A CRAT pays a fixed dollar amount annually; a CRUT pays a fixed percentage of assets revalued each year

    A CRAT pays a fixed annuity amount established at inception, while a CRUT pays a fixed percentage of the trust's fair market value as revalued annually, making CRUT payments variable.

  3. The 'Five Percent Test' applicable to Charitable Remainder Trusts requires that:

    Answer: The annual payout to the income beneficiary must be at least 5% of initial net fair market value

    IRC Section 664 requires that the annual payout rate for a CRT must be at least 5% of the initial net fair market value of the trust assets.

  4. Under the bargain sale rules, when a donor sells property to a charity for less than fair market value, the donor must recognize gain based on:

    Answer: A pro-rata allocation of basis between the charitable and sale portions

    In a bargain sale, the donor's adjusted basis is allocated pro-rata between the gift portion and the sale portion, and gain is recognized on the sale portion based on the allocated basis.

  5. Which of the following best describes the 'Flip CRUT' (Flip Charitable Remainder Unitrust)?

    Answer: A CRUT that converts from a net income unitrust to a standard unitrust upon a triggering event

    A Flip CRUT operates as a net income unitrust until a specified triggering event (such as sale of illiquid assets), then converts to a standard unitrust paying the full unitrust percentage.

  6. For a private foundation to avoid the excise tax on failure to distribute income under IRC Section 4942, it must distribute at least what percentage of its assets annually?

    Answer: 5%

    Private foundations must distribute at least 5% of their net investment assets annually for charitable purposes to avoid the Section 4942 excise tax on undistributed income.

  7. A donor who contributes long-term capital gain property to a public charity generally may deduct up to what percentage of AGI?

    Answer: 30%

    Contributions of long-term capital gain property (such as appreciated stock held over one year) to public charities are limited to 30% of AGI, with a 5-year carryforward.