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

IRC Section 170(b)(1)(C) limits the deduction for gifts of long-term capital gain property to public charities to 30% of the donor's AGI, with a 5-year carryforward for excess contributions.

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

The Section 7520 rate (120% of the applicable federal midterm rate, published monthly) is used to calculate the actuarial present value of income and remainder interests in split-interest trusts such as CRTs and CLTs.

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

A QCD excludes up to $105,000 (indexed for inflation) transferred directly from an IRA to a qualified charity from gross income, reducing AGI and potentially lowering Medicare premiums and Social Security benefit taxation.

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 tax-exempt CRT pays no capital gains tax on the sale; instead, gains accumulate and are characterized under the four-tier system (ordinary income, capital gains, other income, corpus) as distributions flow to beneficiaries.

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

The Tax Cuts and Jobs Act of 2017 permanently increased the AGI limitation for cash gifts to public charities from 50% to 60%, with a 5-year carryforward available for contributions exceeding the annual limit.

CTFA - Certified Trust and Fiduciary Advisor Practice Test

CTFA - Certified Trust and Fiduciary Advisor Practice Test

CTFA Charitable Planning and Philanthropy 3