Bailout Brings Return Of Charitable Incentives

The Tax Extenders and Alternative Minimum Tax Relief Act of

2008, signed into law by President Bush on October 3 as part of the

bailout plan, contains a handful of charitable incentives that are

newsworthy for individuals, businesses and nonprofit

organizations. All of these measures are temporary, with one

expiring as soon as the end of this year.

Limited IRA Charitable Rollover

In certain circumstances, a taxpayer may again exclude from

gross income up to $100,000 of otherwise taxable distributions from

his or her traditional or Roth IRA each year, so long as they are

"qualified charitable distributions." These

distributions must be made directly from the IRA trustee to one or

more qualified public charities. At the time of each

distribution, the taxpayer must have reached age 70½.

And the distributions must otherwise qualify for a full charitable

contribution deduction. The sum of each year's qualified

charitable distributions can go toward satisfying the

taxpayer's minimum distribution requirements. That sum

need not be taken into account, however, in calculating whether the

taxpayer has reached any of the percentage limitations on

deductibility.

Note that contributions to non-operating private foundations,

donor-advised funds and supporting organizations do not qualify,

nor do distributions from employer-sponsored retirement plans such

as SIMPLE IRAs and SEPs. The exclusion only applies to

contributions made during 2008 and 2009.

Basis Adjustment To Stock Of S-Corporation Contributing

Property

The Act preserves the benefit of providing a charitable

contribution deduction for contributions of appreciated property by

an S-corporation. The required basis reduction under prior

law diminished the tax benefit from making such a

contribution. Now, similar to the treatment of partnership

and LLC interests, the amount of a shareholder's basis

reduction in the stock of an S-corporation will again be equal to

the shareholder's pro rata share of the adjusted basis of such

property. This provision applies to contributions made during

taxable years beginning in 2008 and 2009.

Tax Treatment Of Certain Payments To Controlling

Organizations Modified

Under the Act, payments of certain passive income (including

interest, rent, annuities, and royalties) made by an entity that is

more than 50 percent controlled by an exempt organization parent

are again not subject to unrelated business income tax provided

that the payments are determined to be at arm's...

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