Gift Planning Tips

Spring Statistics of Income Bulletin Shows Upswing in Noncash Contributions

The IRS has released the spring 2014 edition of its always-riveting Statistics of Income Bulletin. The latest issue focuses on Tax Year 2011 and includes an article on “noncash” charitable contributions claimed by taxpayers who itemized in 2011. 

The report notes that individual taxpayers who itemized deductions (22.5 million) reported $43.6 billion in noncash charitable contributions. Roughly one-third (7.5 million) of these donors claimed $38.7 billion in gifts on Form 8283, Noncash Charitable Contributions. The number of taxpayers filing Form 8283 increased 3.3%, from 7.3 million for Tax Year 2010 to 7.5 million for 2011. Total gift amounts also climbed, rising 10.9%, from $34.9 billion for 2010. For both tax years, corporate stock donations represented the largest share of total gifts claimed by taxpayers, increasing 19.5%, from $13.4 billion to $16 billion.  The largest number of noncash deductions claimed was for clothing and household goods, although the average dollar amounts were relatively low:  $1,511 for clothing and $1,367 for household goods.

The increase in noncash contributions parallels the rise in stock prices that began in 2009 and continued through the first half of 2014, with major indexes reaching record levels last month.  Also of interest is the number of tax returns in which taxpayers itemized deductions (22.5 million).  That works out to only 24.5% of the total 91.7 million taxable returns reported elsewhere in the spring SoI Bulletin.  Thus, fewer than one out of four charitable donors saved federal taxes from their contributions (leaving aside taxpayers who made qualified charitable distributions that replaced required minimum distributions for 2011).

 


Gifts of Corporate Stock Averaged $142,409

The spring Statistics of Income Bulletin showed an increase in average deductions for a majority of 2011 noncash gifts over 2010 (with the notable exceptions of mutual funds and “other” investments).  This trend may portend a good year for gifts of appreciated securities and other assets in 2014 – assuming the five-year bull market continues.

 

2011
Average Deductions

2010
Average Deductions

 

 

 

Corporate Stock

$142,409

$108,485

Mutual Funds

66,097

128,598

Other Investments*

484,163

803,126

Real Estate

124,239

114,694

Land

132,416

77,006

Easements

383,179

261,027

Arts and Collectibles

9,009

12,475

*Other Investments, unfortunately, is an amorphous category that includes bonds, life insurance, annuities, CDs, notes, options, partnership interests, real estate investment trusts and intellectual property.

 



Fate of IRA Gift Legislation Awaits Lame Duck Session

Donors, charities and gift planners likely will have to wait until November or later to learn the fate of qualified charitable distributions from IRAs for 2014, according to Senate Majority Leader Harry Reid. Reid stated in June that action on the $85 billion tax extenders bills will probably not occur until Congress reconvenes after the fall elections.

Qualified donors (owners of IRAs who are age 70½ or older) who itemize their deductions might consider instructing IRA custodians and trustees to make QCDs (maximum of $100,000) in the hope that Congress will reauthorize the gift strategy for another year, as it has since 2006. If the QCD measure is not extended, donors would have taxable income to the extent of amounts distributed to charity – but they will be entitled to charitable deductions which, in general, will offset tax liability.

 


Hedging One’s Bets on the Longevity of a Bull Market

Many investors are understandably nervous about the future direction of the stock market, amid assertions that stocks are overvalued and that a correction may be just around the corner.  Profit taking entails capital gains and investment income taxes as high as 23.8% in the highest brackets, but several charitable gift strategies might ease the tax pain and move donors into arrangements that let them sleep better at night:

  • Charitable remainder unitrusts enable donors to deduct remainder interests based on the current fair market value of securities they contribute – and trustees can sell and reinvest without depletion from taxes;

  • Contributing stock for a charitable gift annuity avoids capital gains tax and net investment income tax on a large percentage of capital appreciation, and any remaining gain can be reported in installments prorated over the donor-recipient’s life expectancy;

  • Outright gifts of highly appreciated securities facilitate charitable giving at a great discount, and donors might consider making several years’ worth of annual gifts while stock values are high – possibly to a donor-advised fund.

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