Taxation

An income beneficiary of a planned gift may assign to charity his or her right to future payments from the planned gift at any time. The present value of these future payments is the beneficiary's life income interest in the gift. The beneficiary of a charitable remainder trust or pooled income fund is eligible for a charitable income tax deduction equal to the value of his or her life income interest on the day the beneficiary assigns the interest to charity.

A Technical Advice Memorandum (TAM) is a memorandum sent from the IRS National Office to IRS officials in response to a question of tax law, regulations, or rulings regarding a specific set of facts discovered on audit of a tax return. Only the taxpayer for which the TAM is issued may rely on its interpretation.

President Obama signed the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 into law on December 17, 2010. The Act contains a number of provisions that are of particular interest to gift planners. A summary of these provisions is below.

The Taxpayer Relief Act of 1997 (H.R. 2014) was signed by President Clinton on August 5, 1997. The key provisions that we believe will affect gift and estate calculations are listed below. (Editor's note: Many provisions of the Taxpayer Relief Act of 1997 were superceded by The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) and/or The Jobs and Growth Tax Relief and Reconciliation Act of 2003 (JGTRRA)).

Tax-free income is earned income that is not subject to income tax.

A taxable gift is a transfer of assets from one person to another that is subject to gift tax. The federal annual gift tax exclusion in 2015 allows every person to transfer up to $14,000 per year to each of any number of other people (the $14,000 is indexed for inflation and may change in future years). Transfers above this amount are taxable gifts.

The unlimited marital deduction is the transfer tax deduction available for qualifying transfers between spouses. There is no limit to this deduction, so there is never any transfer tax on qualifying transfers between spouses, no matter how large the transfer.

For a transfer between spouses to qualify for the unlimited marital deduction, there must be no nondeductible terminable interest in the transfer. This means that when the receiving spouse's interest in the transfer terminates, no other person may continue to hold an interest in the property.

On May 28th, 2003, President Bush signed into law the Jobs and Growth Tax Relief and Reconciliation Act of 2003 (JGTRRA). The law makes no changes that directly affect deferred giving arrangements. However, it does enact reductions in the individual tax rates. Highlights of JGTRRA that may be of interest to gift planners include a reduced capital gains tax rate, reduced dividend tax rate and acceleration of the reductions in marginal income tax rates that were already scheduled.

On May 28th, 2003, President Bush signed into law the Jobs and Growth Tax Relief and Reconciliation Act of 2003 (JGTRRA). The law makes no changes that directly affect deferred giving arrangements. However, it does enact reductions in the individual tax rates. Highlights of JGTRRA that may be of interest to gift planners include a reduced capital gains tax rate, reduced dividend tax rate and acceleration of the reductions in marginal income tax rates that were already scheduled.

The State Death Tax Credit Table below is used to determine the amount of state death taxes assessed against an estate that can be used as a credit against the federal estate taxes assessed against the same estate. One dollar of credit reduces the federal estate tax by one dollar.