Charitable Giving Strategies Flashcards

A Pooled Income Fund differs from a Charitable Gift Annuity in that the Pooled Income Fund:

Answer: Pays a variable income based on the fund's actual investment return

A Pooled Income Fund pays donors a proportionate share of the fund's actual annual investment income, making payments variable, unlike a CGA which pays a fixed annuity.

The 'Ten Percent Test' for Charitable Remainder Trusts requires that:

Answer: The present value of the charitable remainder interest must be at least 10% of the initial contribution

IRC Section 664 requires that the present value of the remainder interest passing to charity must be at least 10% of the initial net fair market value of assets transferred to the trust.

Which of the following is a self-dealing transaction prohibited under IRC Section 4941 for private foundations?

Answer: Making a loan to a foundation manager even at market interest rates

Under IRC Section 4941, loans between a private foundation and a disqualified person constitute self-dealing regardless of whether the terms are at market rates.

A Charitable Lead Trust (CLT) is most useful for estate planning when:

Answer: Interest rates are low and assets are expected to appreciate significantly

CLTs are most effective when the Section 7520 rate is low (reducing the calculated value of the charity's annuity) and assets are expected to appreciate, maximizing the remainder passing to heirs.

What IRS form must a donor obtain from a charity for a single cash contribution of $250 or more to support the deduction?

Answer: A contemporaneous written acknowledgment from the charity

For contributions of $250 or more, donors must obtain a contemporaneous written acknowledgment from the charity before filing their tax return, or the deduction is disallowed.

Which rule limits the deduction for contributions of ordinary income property (such as inventory) to a public charity?

Answer: The deduction is limited to the donor's adjusted basis in the property

Contributions of ordinary income property are limited to the donor's adjusted basis; the donor cannot deduct the unrealized ordinary income element that would have been recognized on a sale.

A donor age 72 with a large IRA wants to make a significant charitable gift while satisfying their Required Minimum Distribution. Which strategy accomplishes both goals most efficiently?

Answer: Make a Qualified Charitable Distribution directly from the IRA to a public charity

A QCD up to $100,000 transfers directly from an IRA to a public charity, satisfies the RMD requirement, and is excluded from gross income, making it the most tax-efficient approach.