In a legal memorandum, the Service has determined a testamentary trust that was named as the beneficiary of a decedent's IRA cannot claim an income tax deduction under section 642(c) for payments it made to charities. The trust was to pay a percentage of the trust property to the decedent's children and to several charities; however, it failed to meet the regulatory definition of a designated beneficiary trust under section 401(a)(9). Although the trust was subsequently modified by court order to comply, the Service determined the purpose of the modification was to permit the trust to deduct payments made to charities. Citing a revenue ruling and court decision, the Service concluded that since the modification was not made as the result of a conflict, the payments to the charities are not considered to be made under the governing instrument and, therefore, are not deductible.  MORE »

In emailed Chief Counsel Advice pursuant to a pending case, the IRS reviews the contemporaneous written acknowledgment requirements for gifts of conservation easements under section 170(f)(8)(A).  MORE »

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 »

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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