DONATIONS TO PYC FOUNDATION AND
THEIR POTENTIALLY ADVANTAGEOUS TAX TREATMENT
Subject to various possible limitations, a direct cash donation to the Foundation by an individual or business is deductible in computing taxable income under federal tax law. Donations can also be made by private and public foundations and donor-advised funds.
Depending on an individual’s particular circumstances, other strategies may have attractive tax advantages including, for example, making the donation in the form of publicly-traded stock (including in a mutual fund) or bonds. This can have the effect of saving taxes twice---income tax and capital gains tax ----allowing the donor to consider making a larger donation than one made in cash.
Under the right circumstances, these income tax advantages may also be available with a donation of non-traded or closely-held stock, personal property, or real estate.
If an individual is at least 70 and 1/2 years old and has a traditional (not Roth) IRA, it is often advantageous to make a donation directly from the IRA to the Foundation as a “qualified charitable distribution” (“QCD”). If an individual implements a QCD from his or her IRA, the amount of the distribution will not be included in the individual’s federal taxable income, so it is as good as getting an itemized deduction for a donation made directly from the individual’s non-IRA resources; it is often actually better in that the reduction in taxable income can favorably affect other calculations on his or her return.
An individual is permitted to donate to charity up to $100,000 from his or her IRA in any year as a QCD. If he or she has attained an age such that minimum distributions from the IRA are required annually, the IRA donation counts toward the annual minimum requirement---as noted above, without requiring any inclusion in the donor’s federal taxable income.
DONOR’S ESTATE PLANNING
Depending on the circumstances, a donation to the Foundation can also be an important consideration in the donor’s estate planning, potentially having favorable estate tax implications as well.
The simplest form of estate donation is by way of a donor bequest, which might be limited to one or more particular priorities of the Foundation favored by the donor. A bequest can be specific, conditional, or residual. For example, a bequest may provide that $X is donated to the Foundation, but only if the donor’s total estate (or liquid portion of the estate) is in excess of $Y.
Another simple type of donation, also often tax-wise, is to include the Foundation as a primary or contingent beneficiary of an IRA or other qualified retirement plan. Completing a beneficiary designation form requires minimal paperwork and can often be done directly on the website of the IRA or retirement plan.
A donor could designate the Foundation as a beneficiary of a life insurance policy, or transfer the policy to the Foundation making an ongoing commitment to pay the life insurance premiums.
Creation of a split interest arrangement such as a charitable gift annuity or a charitable remainder trust allows the donor to grant a life income interest either to the donor or to some other beneficiary, with the remainder interest eventually passing to the Foundation.
Under the right circumstances, a donor could deed his or her primary residence, vacation property, or other real estate to the Foundation while retaining the right to continue occupancy by the donor or other person during their lifetime.
The Foundation cannot give tax or other legal advice to any prospective donor. However, a member of the Foundation board having some helpful experience is available to help you on a confidential preliminary basis. Most if not all of the types of donations described above require additional input from the individual’s own professional advisor. The board member will be happy to work with such advisor, again on a confidential basis, in considering any donation strategy.
A copy of the formal exemption letter issued by the Internal Revenue Service to the Foundation can be found on the Foundation website at PequotYCFoundation.org . Alternatively, a copy will be sent by email if a request for it is addressed to info@PequotYCFoundation.org.