PGDC - Planned Giving Design Center

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.

Proposed Regs Prorate Tax Character of Income Distributions from CLTs to Charitable Beneficiaries

marc.hoffman@pgdc.com — Wed, 18 Jun 2008 23:41:21 -0400

Treasury has issued proposed regulations that will amend the regulations under section 642(c) to confirm that a provision in a governing instrument of a charitable lead trust or in local law that specifically provides as to the source out of which amounts are to be paid, permanently set aside or used for a purpose specified in section 642(c) must have economic effect independent of income tax consequences in order to be respected for Federal tax purposes. Accordingly, payments to a charity will consist of the same proportion of each class of the items of income of the trust as the total of each class bears to the total of all classes. See § 1.642(c)-3(b)(2).

July 7520 Rate Up to 4.2%

marc.hoffman@pgdc.com — Wed, 18 Jun 2008 01:20:36 -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 2008-33 indicates the applicable federal rate under section 7520 for July 2008 is 4.2%; up 0.4% from the June rate of 3.8% and up 1.0% from the May rate of 3.2%.

AICPA Seeks to Clarify UBTI Character of CRT Payments Made to Charity

marc.hoffman@pgdc.com — Tue, 17 Jun 2008 13:04:26 -0400

Writing on behalf of of the American Institute of Certified Public Accountants, Jeffrey R. Hoops has submitted comments to clarify that unrelated business taxable income ("UBTI") does not retain its character as such if it is distributed by a charitable remainder trust ("CRT") to a charitable organization as part of the annual annuity or unitrust payment. Although uncommon, it is possible to name a section 170(c) organization as a co-income recipient of a CRT.

IRS Releases New Publication 557

marc.hoffman@pgdc.com — Tue, 17 Jun 2008 11:57:46 -0400

The IRS has released revised Publication 557 - Tax-Exempt Status for Your Organization (June 2008). The publication incorporates numerous changes in law brought about by the Pension Protection Act of 2006 that affect tax-exempt organizations.

Split of CRT Upon Split of Spouses Approved

marc.hoffman@pgdc.com — Tue, 17 Jun 2008 11:52:31 -0400

The Service has ruled privately that the division of a charitable remainder trust pursuant to a marital separation agreement will not result in a private foundation termination tax under section 507, will not be an act of self-dealing under section 4941, and will not be a taxable expenditure under section 4945 of the Code.

More Endowment/CRT Investment Rulings

marc.hoffman@pgdc.com — Tue, 17 Jun 2008 11:48:03 -0400

In separate letter rulings, the IRS has ruled that educational institutions that issue investment units from their endowment funds to CRTs for which they serve as trustee will not produce unrelated business taxable income to the trusts.

S. 3098 Would Extend AMT Relief, Expiring and Charitable Provisions

marc.hoffman@pgdc.com — Tue, 10 Jun 2008 10:40:01 -0400

S. 3098, the Alternative Minimum Tax and Extenders Tax Relief Act of 2008, introduced by Senate Minority Leader Mitch McConnell, R-Ky., would extend alternative minimum tax relief and a number of expiring provisions. Of interest to charitable planners are tax-free distributions from individual retirement plans for charitable purposes, enhanced charitable deduction for contributions of food inventory, extension of enhanced charitable deduction for contributions of book inventory, and basis adjustment to stock of S corporations making charitable contributions of property.