PGDC - Planned Giving Design Center

You Get What You Don't Pay For

marc.hoffman@pgdc.com — Wed, 06 Aug 2008 09:38:25 -0400

The Service has ruled privately that a charitable remainder unitrust can be reformed from inception based on the finding the measuring term does not reflect the trustors' original intent. Of note in this case is the fact the trust was created with the help of the charitable remainderman and the trustors' family members, and without the assistance of a professional tax advisor.

Family Pays Tax and Penalties on $204 Million Gain

marc.hoffman@pgdc.com — Wed, 06 Aug 2008 09:33:45 -0400

In an August 1, 2008 statement, DOJ Deputy Assistant Attorney General John DiCicco comments on a Claims Court ruling that denied deductions and imposed a 40% penalty on a family that sold stock in their business and used a portion of the proceeds to purchase a "Son of BOSS" digital foreign currency tax shelter in an effort to avoid $40 million in capital gains taxes. Under the topic of food for thought, although this case included no charitable component, we wonder if the tax(and penalty)payers' advisors ever presented a charitable remainder trust or other philanthropic planning vehicle for their clients' consideration?

Service Rules on Merger of Exempt Organizations

marc.hoffman@pgdc.com — Tue, 05 Aug 2008 17:52:06 -0400

In two companion rulings, the Service has ruled privately that a merger of two public charities described in section 501(c)(3) will not result in the revocation of or otherwise adversely affect either organization's continued tax-exempt status as a public charity, will not generate unrelated business taxable income to either organization, and will not adversely affect the support test of either organization.

Bill Would Increase Charitable Mileage Rate for Delivery of Meals

marc.hoffman@pgdc.com — Tue, 05 Aug 2008 17:12:20 -0400

Rep. Robert E. Latta, R-Ohio has introduced H.R. 6675 that, if enacted, would increase the standard deductible mileage rate for people delivering meals to elderly, disabled, and at-risk individuals to 58.5 cents per mile.

Finance Committee Compares Midwestern Disaster Relief Bills

marc.hoffman@pgdc.com — Wed, 30 Jul 2008 04:03:19 -0400

The Senate Finance Committee has released a comparison of disaster tax relief legislation (S. 3322) introduced by Finance ranking minority member Chuck Grassley, R-Iowa, to the Fair Disaster Tax Relief Act, introduced by House Ways and Means Committee member Ron Kind, D-Wis. Charitable provisions included in the Senate bill include a temporary suspension of limitations on charitable contributions dedicated to Midwestern disaster relief efforts, an increase in the standard mileage rate for charitable use of vehicles and exclusion from income of mileage reimbursements for taxpayers assisting in relief efforts related to the Midwestern disaster, and a general enhanced deduction for donations of food and book inventory.

IRS Publishes Sample Testamentary Charitable Lead Unitrust Form

marc.hoffman@pgdc.com — Wed, 30 Jul 2008 03:47:31 -0400

The IRS has issued Rev. Proc. 2008-46 which contains annotated a sample declaration of trust and alternate provisions for a testamentary charitable lead unitrust with payments to one or more charitable beneficiaries for the unitrust period followed by the distribution of trust assets to one or more noncharitable remaindermen.

IRS Publishes Sample Inter Vivos Charitable Lead Unitrust Forms

marc.hoffman@pgdc.com — Wed, 30 Jul 2008 03:36:52 -0400

The IRS has issued Rev. Proc. 2008-45 which contains annotated sample declarations of trust and alternate provisions for grantor and nongrantor inter vivos charitable lead unitrusts with payments to one or more charitable beneficiaries for the unitrust period followed by the distribution of trust assets to one or more noncharitable remaindermen.

Final Regs Address Portion of Split-Interest Transfers Includable in Gross Estate

marc.hoffman@pgdc.com — Mon, 21 Jul 2008 01:00:41 -0400

On June 7, 2007, Treasury issued proposed regulations that address the portion of a trust that is includable in a deceased grantor's gross estate under sections 2036 and 2039 in the event the grantor has retained the use of trust property or the right to an annuity or other income payment from the trust for life. Following the comment period and public hearing, Treasury has issued final regulations that are effective July 14, 2008. In addition to amounts includable with respect to GRATs, GRUTs, GRITs and CRTs measured by life, the final regulations address pooled income funds, remainder interests in personal residences and farms, and CRTs measured by a term of years.

August 7520 Rate Unchanged at 4.2%

marc.hoffman@pgdc.com — Mon, 21 Jul 2008 00:44:29 -0400

For purposes of determining the present value of an annuity, an interest for life or a term of years, or a remainder or a reversionary interest, Revenue Ruling 2008-43 indicates the applicable federal rate under section 7520 for August 2008 is 4.2%; unchanged from the July rate of 4.2% and up 0.4% from the June rate of 3.8%.

Service Not Steamed Over REIT Providing Utilities

marc.hoffman@pgdc.com — Tue, 15 Jul 2008 04:57:06 -0400

The Service has ruled privately that a Real Estate Investment Trust's provision of steam and electricity to the tenants of a commercial office building are a customary service and, therefore, not considered impermissible services rendered to the occupants. Accordingly, rents received by the REIT will not be treated as unrelated business taxable income.

Guidance Issued on Dividing CRTs

marc.hoffman@pgdc.com — Thu, 10 Jul 2008 07:47:23 -0400

The Service has issued a long-awaited revenue ruling in which it addresses two situations in which a charitable remainder trust is divided pro rata into two or more separate trusts. Such divisions are common when the income recipients desire to separate their interests and when joint income recipients divorce.

Organization Properly Classified as Supporting Organization

marc.hoffman@pgdc.com — Thu, 10 Jul 2008 06:55:31 -0400

The Service has ruled in technical advice that an organization is properly classified as a supporting organization under section 509(a)(3). At issue was whether the organization was controlled directly or indirectly by one or more disqualified persons. The Service determined it was not even though the foundation managers were disqualified persons with respect to a private foundation that was a substantial contributor to the supporting organization.

H. R. 6283 Would Increase Charitable Mileage Rate

marc.hoffman@pgdc.com — Tue, 01 Jul 2008 17:54:15 -0400

Lawmakers have introduced legislation that would increase the standard mileage rate for use of an automobile for business, medical, and moving deduction purposes for 2008 and permanently increase such rate for charitable deduction purposes.

New Reserve Requirements for Charities That Issue Gift Annuities in New York

marc.hoffman@pgdc.com — Tue, 01 Jul 2008 16:28:17 -0400

Writing on behalf of the American Council on Gift Annuities, Lindsay Lapole and Frank Minton have announced the State of New York has issued new reserve requirements for charities that issue charitable gift annuities in New York.

TIGTA Reports on Political Activities Education and Enforcement Program

marc.hoffman@pgdc.com — Tue, 01 Jul 2008 13:15:48 -0400

The Treasury Inspector General for Tax Administration has issued a report on its Political Activities Compliance Initiative that seeks to educate tax-exempt organizations regarding political campaign intervention, improve internal processes, and detect tax-exempt organizations that are potentially involved in repeated campaign intervention. Although progress has been made, the report concludes that timeliness goals can be improved.

Endowment Investment Units Deemed Capital Assets

marc.hoffman@pgdc.com — Tue, 01 Jul 2008 12:57:57 -0400

The Service has ruled privately that investment units created by a university from its endowment fund for the purpose of investing in charitable remainder unitrusts for which the university serves as trustee are capital assets under section 1221. Accordingly, gain or loss upon the redemption of a unit will be short or long-term capital gain or loss to the unitrust depending on the holding period of the unit by the unitrust.

Surprising News About Stocks and Other Non-Cash Gifts

marc.hoffman@pgdc.com — Wed, 25 Jun 2008 14:00:38 -0400

According to a new article by Barlow Mann of The Sharpe Group, organizations asking their older donors to simply include them in their will may be missing a tremendous opportunity: current gifts of publicly-traded securities and other non-cash assets.

U.S. Charitable Giving Estimated to be $306.39 Billion in 2007

marc.hoffman@pgdc.com — Tue, 24 Jun 2008 12:02:19 -0400

Charitable giving in the United States is estimated to be $306.39 billion in 2007, exceeding $300 billion for the first time in history, according to Giving USA 2008, the yearbook on philanthropy released today by Giving USA Foundation.

IRS Increases Mileage Rates through Dec. 31, 2008

marc.hoffman@pgdc.com — Tue, 24 Jun 2008 11:58:18 -0400

The Internal Revenue Service today announced an increase in the optional standard mileage rates for the final six months of 2008. Taxpayers may use the optional standard rates to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes. Unfortunately, the rate for providing services for charitable organizations is set by statute, not the IRS, and remains at 14 cents a mile.

Organization Designed to Facilitate Donations of Real Estate Denied Exempt Status

marc.hoffman@pgdc.com — Mon, 23 Jun 2008 22:04:50 -0400

The Service has denied tax-exempt status under section 501(c)(3) to an organization that is organized to facilitate contributions of real estate donations to colleges and universities on the basis the organization is not organized exclusively for charitable purposes. In addition, the Service ruled that since all of organization's activities constitute the operation of a commercial activity, it is organized and operated for the primary purpose of carrying on an unrelated trade or business.

Recapitalized Companies Owned by Private Foundation Satisfy Excess Business Holdings Rules

marc.hoffman@pgdc.com — Mon, 23 Jun 2008 21:48:49 -0400

The Service has ruled privately that a private nonoperating foundation's proposed recapitalization of companies bequeathed to it by its founder will be permitted holdings, and its ownership of 100 percent of the stock of a corporation will not be considered excess business holdings because the corporation is a functionally related business.

Trust Distributions Under Settlement Agreement Approved

marc.hoffman@pgdc.com — Mon, 23 Jun 2008 21:46:06 -0400

The Service has ruled privately that a proposed distribution of assets from a testamentary trust to two charitable beneficiaries, that could not otherwise resolve a conflict regarding how income would be distributed and pursuant to a court-approved settlement agreement, will qualify for an estate tax charitable deduction.

Foundation Awards Program Approved

marc.hoffman@pgdc.com — Mon, 23 Jun 2008 21:42:20 -0400

The Service has ruled privately that a private operating foundation's establishment of a financial awards program intended to recognize individuals for their past charitable, scientific, educational or literary achievements do not need pre-approval by the Internal Revenue Service, will not be taxable expenditures by the organization, and will be qualifying distributions.

CRT Reformed to Correct Scrivener's Error

marc.hoffman@pgdc.com — Mon, 23 Jun 2008 21:39:25 -0400

The IRS has approved a judicial reformation of a charitable remainder unitrust to correct a drafting error. The trust was drafted inadvertently as a net income makeup unitrust when a standard payout format was intended. The reformed trust will be treated as a standard unitrust from inception.

Creating a Temporary Private Foundation Using a Charitable Lead Trust

robert@sharpenet.com — Thu, 19 Jun 2008 01:58:51 -0400

One of the greatest planning challenges for many philanthropists is to balance their goals of providing for charity in the immediate term and family members long-term. In this case study, The Sharpe Group illustrates how a couple concerned about an uncertain gift and estate tax environment uses an inter vivos nongrantor nonrersionary charitable lead annuity trust as a "temporary" private foundation.