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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