Charitable Transfers - Answer Key

1. D

Private foundations must do their own record keeping, due diligence and file a Form 990-PF with the IRS annually. Most contributions come from a single source and these donors typically have a 30% limit on adjusted gross income for contributions to private foundations.

2.
B

The advantages of the charitable annuity include: assets removed from the estate of the donor, partial tax deduction, annuity income for a lifetime and the personal satisfaction of donating funds to a charity of your choice.

3.
C

A CRAT is the best choice for Kevin because it can be setup to provide a fixed income payment to him for the next 10 years in order to meet his mortgage payment needs. At the end of the 10-year period, the Humane Society will receive the remaining interest in the trust. Kevin will get an immediate charitable deduction from the present value of the remaining interest.

4.
A

The keys here are that they want no involvement in the program selected, do not need any income and they want to create a family legacy. The donor advised fund is the only option that will accomplish all three of these wishes.

5.
D

A charitable lead trust would be the best option because the trust could be setup for a 12-year term for which the church would still receive the income generated by the trust assets, and the grandchildren would get the remaining interest in the trust in 12 years.

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