The IRS has ruled privately that a transfer by taxpayer to a charity in exchange for a charitable gift annuity will be deductible for income and gift tax deduction purposes and will not be barred by § 170(f)(10)(A) (relating to split-dollar life insurance, annuity and endowment contracts). In this case, the charity will use a portion of the amount transferred by the donor (in the form of a single premium) to purchase a commercial annuity contract to cover its obligations under the gift annuity agreement. The commercial contract will include an option that returns a portion of the premium paid by the charity to it in the event the annuitant dies prior to the aggregate payments made by the insurer equaling or exceeding the premium paid.

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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 2008-53 indicates the applicable federal rate under section 7520 for December 2008 is 3.4%; down 0.2% from the November rate of 3.6% and down 0.4% from the October rate of 3.8%.  MORE »

The Internal Revenue Service has issued the 2009 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.  MORE »

The Service has denied a proposed supporting organization to a community foundation's application for tax-exempt status based on the fact that neither the donor nor the contribution assets were identified. In the absence of a donor or assets, the Service could not determine the SO would be operated for exclusively exempt purposes and that the disqualified person would not inure or privately benefit through their relationship with the organization. "In effect," the Service said, "you seem to be trying to create a 'prototype' application package in which you can receive favorable determinations for the entities prior to identifying or even finding the donor and determining the non-marketable assets.   MORE »

The Service has ruled privately that an early termination of a charitable remainder unitrust and distribution of trust assets between income and remainder beneficiaries will not result in a prohibited act of self-dealing even though the charitable remainderman is a supporting organization at the time of the transaction and even though the grantor/income recipients are directors of the SO. The ruling is based on the fact a supporting organization is considered a public charity. The Service stated the ruling would not be valid if the remainderman was a private foundation at the time of the transaction.  MORE »

In a complicated fact pattern, the Service has ruled privately that a private nonoperating foundation that receives stock of an S corporation/holding company via an irrevocable trust established by a shareholder/grantor and to which the excess business holdings rules apply will have five years to dispose of the stock that begins on the date the stock is actually transferred from the trust to the foundation.  MORE »

The IRS on Halloween issued Notice 2008-99 in which it announced its interest in a type of transaction involving the sale of interests in a charitable remainder trust that might result in inappropriate tax avoidance by the trust’s grantor. The notice requires any persons entering into and material advisers who make a tax statement regarding such transactions, as well as charitable remaindermen that participate to disclose the transaction to the IRS. In addition, the Service and Treasury are requesting public comments on how the transaction might be addressed in published guidance.

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One of the most powerful features of the PGDC is its search capabilities.  Finding documents that provide the latest thinking from leading professionals, the IRS, courts, and legislators help you find the answers you need to help your clients and donors give wisely. And now, PGDC Search has been improved dramatically!

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Life settlement, in which life insurance policies are sold in a secondary market, has become a major financial market and viable opportunity for policyowners to convert unneeded policies for more than their cash surrender value (CSV), often with favorable tax treatment. In this article from the Journal of Accountancy, appraiser Alan Breus, CLU, ChFC reviews the history of the life settlement marketplace, emerging regulation, income tax consequences, tips for safe transactions, and charitable applications.

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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 2008-50 indicates the applicable federal rate under section 7520 for November 2008 is 3.6%; down 0.2% from the October rate of 3.8% and down 0.6% from the September rate of 4.2%.  MORE »