Gift of commercial annuity

Gift of commercial annuity

Forum topic posted in Forum on 2 September 2008| 10 comments
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Joined: 03/21/2008
Points: 45
Anyone dealt with the valuation (and any other pitfalls) of a gift of a commercial deferred annuity to a public charity?

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Joined: 11/16/2014
Points: 0
Re: Gift of commercial annuity

I want to use all of a taxable annuity I just received to fund a 501(c)(3) I'm setting up. Since I account on a cash basis, since the money never touches my hands, this does not count as income for me, right?

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Joined: 10/15/2009
Points: 20
agree with you that The
agree with you that The charity will certainly benefit from the current gift, thank you for article.
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Joined: 03/21/2008
Points: 45
Thanks
...to all for your thoughts and insights. Brent and Walter, I agree, and it does seem that we need favorable facts and/or a particularly motivated donor to do this. So far as the CGA comments, interesting and I hadn't considered that. It certainly might be a sweetener in this case.
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Joined: 11/01/2007
Points: 30
Annuity Gifting
One more thought on gifting a commercial non-qualified deferred annuity to fund a CGA...with all of the anti-money laundering sentiment that is swirling in these waters, you may wind up exposing the donor to more financial disclosure than they are comfortable with. Goliath lost.
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Joined: 06/16/2004
Points: 15
Gift of Commercial Annuity
Although CGAs are often effective to spread out taxable income, in the case of a commercial annuity the taxable event occurs immediately on the transfer. Therefore, the income would be still all be reported in the current year.
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Joined: 01/12/2000
Points: 45
Gift of Commercial Annuity
If you funded a charitable gift annuity with a commercial annuity that would have taxable ordinary income to the donor if given outright to a charity, wouldn't the donor be able to spread the taxation of that gain over a number of years? Is so, this would seem to be an option that a donor may wish to consider. Thoughts?
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Joined: 11/01/2007
Points: 30
Tax Hit
Great concept, but the donor would still have the up front tax hit on the appreciated gain upon the ownership change. What may work is the donation of a qualified annuity if you can combine it with other appreciated assets to then fund a CGA. Don't think that you would have enough of a gain in most qualified plans to make it work otherwise. Just a thought. Goliath lost.
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Joined: 08/15/2003
Points: 15
Gift of commercial annuity
Assuming it is a deferred annuity, the gift causes the owner of the annuity to be taxed on any deferred gain. For example, John buys a deferred annuity and pays a $20,000 premium. Some years later, when the value of the annuity is $30,000 (and assuming he has done nothing to change his basis), he gifts the annuity to a charity, his children or anyone other than his wife. In the year he makes the gift, John has $10,000 of taxable income. IRC
Brent Dunn's picture
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Joined: 03/28/2002
Points: 45
gift of a commercial annuity
Jeremy, Even if the insurance company allowed the ownership to change from the individual to the charity, I believe the tax consequence would be the same as the individual cashing in the annuity, then contibuting the cash. If the current annuity value is greater than the amount contributed by the individual, the difference will be taxed as ordinary income to the individual. Giving this type of asset is not as favorable as giving an appreciated stock, where the capital gain is avoided by the donor. The amount of the deduction and the tax savings from the deduction may be greater than the amount of the tax liability from cashing in the annuity. The donor may enjoy some current tax savings, and the asset will be out of his estate. The charity will certainly benefit from the current gift. An alternative would be to name the charity as the benefiary of the annuity, but that means the charity must wait for the gift (until the annuitant dies), and the donor will forgoe any current income tax benefits.
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Joined: 05/07/2007
Points: 75
Gift of Commercial Annuity
Jeremy is correct under code section 72(e)
7520 Rates: November 2.4% October 2.2% September 2.4%

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