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The Pension Protection Act of 2006 (PPA 2006) passed the House and Senate by
wide margins, and was signed into law on August 17, 2006. It is potentially the
most favorable charitable legislation in many years. However, it expired already
on December 31, 2007. Congress may extend it before the end of 2008. Contact
Alice Benson at
alice.benson@elca.org to hear if there is any news. View text:
http://www.crescendointeractive.com/ira_rollover_article.jsp
Practical, Convenient, and Easy IRA Rollover
With the passage of the IRA rollover for current gifts, many friends of
charities will be contacting their advisors to discuss a possible IRA charitable
gift this year. A primary benefit of the IRA rollover is that it is an easy and
simple way to make a charitable gift. Let's consider the practical aspects of
this rollover for Mary Wilson.
Mary Wilson is a surviving spouse. When her husband Harry passed away, she
received his IRA. The combination of the two IRAs has grown to over $450,000.
Fortunately, Mary owns her home and also has a substantial value in certificates
of deposit and mutual funds.
Mary recently turned 71. She volunteers regularly for her favorite charity and
makes a gift each year of $2,000. This is a substantial gift for Mary. Since she
has watched the IRA grow substantially over the years, Mary and her advisor know
that the best way to make the gift is to take the $2,000 from the IRA. But in
prior years Mary would withdraw $2,000 from her IRA, report that amount in her
income, and then write a check to favorite charity. Each year the charity would
give Mary a receipt, since the gift is over $250. Her CPA then reported and
deducted the $2,000 charitable gift on her tax return.
For 2006, her CPA suggested that Mary make an IRA charitable rollover gift. This
would simplify her tax return, since there would be no tax on the IRA rollover.
Mary contacted her IRA custodian and was sent the updated IRA withdrawal form.
She filled out the form, requested a charitable rollover of $2,000 and
designated her favorite charity by legal name, city and state. Since her
favorite charity is a public charity, not a supporting organization or private
foundation, the IRA rollover is permitted.
Therefore, the financial company made a $2,000 "qualified charitable
distribution" from her IRA to favorite charity. The balance of Mary's required
minimum distribution was then distributed to her. Her CPA reported the balance
of the IRA required distribution to her on her tax return, but Mary was not
taxed on the $2,000 gift to charity.
Mary's favorite charity sent her a receipt noting that the gift was a qualified
charitable distribution from her IRA. Mary and her CPA both were pleased with
the simplicity of the IRA charitable rollover. The $2,000 did not get reported
on her income tax return and she did not have to itemize to take the deduction.
The simplicity and convenience of this gift was a wonderful benefit for Mary.
Contact alice.benson@elca.org with your questions about the Pension Protection
Act 2006.
Alice Benson, MBA, CFRE
Executive Director
Lutheran Planned Giving Consortium, Metro DC
6 Sioux Court
Gaithersburg, MD 20878
301-963-6570
alice.benson@elca.org
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