CTFA Charitable Planning and Philanthropy 3

Question 1

Under IRC Section 170(b)(1)(C), a donor's income tax deduction for a gift of long-term capital gain property to a public charity is limited to what percentage of adjusted gross income (AGI)?

Accepted Answer

30% of AGI, with a 5-year carryforward for excess amounts

Answer

20% of AGI, with a 5-year carryforward for excess amounts

Answer

50% of AGI, with a 3-year carryforward for excess amounts

Answer

60% of AGI, with no carryforward allowed

Question 2

The IRC Section 7520 rate is used in charitable planning primarily to:

Accepted Answer

Calculate the present value of charitable and non-charitable interests in split-interest trusts

Answer

Set the minimum annual payout percentage for private foundations

Answer

Determine the maximum income tax deduction for gifts to donor advised funds

Answer

Establish the excise tax rate on net investment income of private foundations

Question 3

A Qualified Charitable Distribution (QCD) from an IRA is advantageous for eligible donors age 70½ or older primarily because:

Accepted Answer

It excludes the transferred amount from gross income, reducing AGI even for non-itemizers

Answer

It allows a charitable deduction above the standard deduction limit for all donors

Answer

It permanently satisfies all future Required Minimum Distribution obligations from the account

Answer

It allows transfers exceeding the annual gift tax exclusion without gift tax consequences

Question 4

When a Charitable Remainder Trust sells appreciated stock contributed by the donor, what is the correct federal income tax treatment of the resulting capital gains?

Accepted Answer

Capital gains accumulate in the trust and are distributed to beneficiaries under the income tier system as payments are made

Answer

The donor recognizes and pays capital gains tax in the year the trust sells the stock

Answer

The trust pays capital gains tax immediately upon sale at a reduced rate

Answer

Capital gains are permanently exempt from taxation within the CRT structure

Question 5

Under IRC Section 170, the AGI limitation for cash contributions to public charities is currently:

Accepted Answer

60% of the donor's AGI

Answer

30% of the donor's AGI

Answer

50% of the donor's AGI

Answer

100% of the donor's AGI up to the amount of the gift

Question 6

Under the 'worst-in, first-out' tier system for Charitable Remainder Trusts, in what order are distributions characterized for income tax purposes?

Accepted Answer

Ordinary income first, then capital gains, then tax-exempt income, then return of corpus

Answer

Tax-exempt income, capital gains, ordinary income, then return of corpus

Answer

Return of corpus, then ordinary income, capital gains, and tax-exempt income

Answer

Capital gains first, then ordinary income, tax-exempt income, and return of corpus

Question 7

A donor contributes a painting worth $50,000 (cost basis $10,000) to a museum that will display it publicly. What income tax deduction is the donor entitled to claim?

Accepted Answer

$50,000 (full fair market value), because the related use rule is satisfied when a museum displays donated artwork

Answer

$10,000 (cost basis only), because deductions for tangible personal property are always limited to basis

Answer

$25,000 (50% of fair market value), regardless of the museum's intended use of the artwork

Answer

$0, because artwork is specifically excluded from the charitable deduction rules under IRC Section 170