Discussion:Tax Free Distribution from IRA for Charity
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Discussion Forum Index --> Tax Questions --> Tax Free Distribution from IRA for Charity
| 10 August 2006 | |
| One of my clients believes that there is a law that allows a taxpayer to take a distribution from his IRA for charitable purposes and exclude the income from the distribution. I cannot find such a law. Is the client correct? | |
| 10 August 2006 | |
| I just recently read something about charitable contributions...did it have to do with IRA's? I'll have to look it up. If I can find where I read it, I'll get right back to you. | |
| 10 August 2006 | |
| I found it...I get this Spidell California Tax Flash Bulletin via e-mail, and it refers to a bill recently submitted to President Bush for signature, called the Pension Protection Act of 2006.
If you'd like to have me forward it to you, click on my name and write me an e-mail. | |
| 10 August 2006 | |
| Also KATRINA EMERGENCY TAX RELIEF ACT OF 2005 | |
| 10 August 2006 | |
| Up to 100k through 2007 - also now all cash contributions must be substantiated - no more out of pocket cash. Employees will now be enrolled automatically in 401k's - they have to elect out of them if they desire no participation. Non-cash contributions now must be classified as in good condition but will be no regs defining good. New rules now for 401k hardship withdrawals. Direct plan to Roth IRA rollovers now allowed - no need now to go to tradition IRA then to Roth. | |
| 10 August 2006 | |
| Under the new Pension Protection Act of 2006 which President Bush has indicated he will sign, a taxpayer who has attained the age of 70½ can make a trustee to charity transfer of IRA funds of up to $100,000 per year. This provision is effective for 2006 and 2007 only. Amounts constituting basis apparently will not qualify and amounts transferred will be treated as coming from other than basis first. | |
| 10 August 2006 | |
| Take a look at the Pension Protection Act of 2006 overview page which we have put together here on TaxAlmanac.
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| 12 August 2006 | |
| Per the Joint Committee, up to 100k per TP for each year (2006-2007) and it does not reduce any other contributions on Sch A. Since you have to be at least 70 1/2, it can apply to the RMD. | |
| 4 December 2006 | |
| any knowledge if the $ 100,000 is limited if the donation is made to a charity where the individual is also the Executive Director? | |
| 5 December 2006 | |
| Hi no just because it's your favorite charity or you work or volunteer there doesnt change the rule. bye | |
| 11 December 2006 | |
| The 'Wise Man' suggested that instead of the taking the RMD direct it can be sent to a charity. Is that what he was saying, is that true, and where is that written in the law? | |
| 11 December 2006 | |
| I'm not in the mood to look this up, but it's not "can be" but "must be". Otherwise recipient recognizes income. Entity transfer satisfies the RMD requirement without generating income or producing a deduction. | |
| 11 December 2006 | |
| Vanguard, and I assume others, mails the check to the donor and in turn the donor mails it to the charity. Although the Pension Reform Act says a direct transfer, in fact it is now not being done that way. The coding on the 1099-R with be 7 - a normal distribution. The Service is suppose to issue regulations telling the taxpayer how to make this election. The new instructions for the 1099-R do not have a new code for it. By the way, Vanguard has done this directly and the check comes back to them because the charity wanted information regarding the donor so now they mail it to the donor. Finally, Vanguard's attorneys said the IRS instructed them to code the 1099-R with code 7. | |
| December 11, 2006 | |
| Solomon: You mentioned the Pension Reform Act above - is that the same as the Pension Protection Act of 2006?
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| 11 December 2006 | |
| The question that I have is not related to the mechanics of making the contribution. It relates to the MRD for the year of the contribution to charity. Does the contribution to the charity constitute an MRD such that if the amount of the contribution to the charity would be equal or greater than the MRD no additional distribution would be required? If this is so, could you point me to the authority for this position. Not saying it isn't correct. I just want something for my file. Thank you all for your support. | |
Death&Taxes (talk|edits) said: | 11 December 2006 |
| Ken: RIA cites the Joint Committee Staff Technical Explanation of the PPA of 2006 as authority regarding the RMD. | |
| 11 December 2006 | |
| Ken - Scroll down to find the Joint Committee Technical Explanation. | |
Death&Taxes (talk|edits) said: | 11 December 2006 |
| Thanks for the reference, Solomon. Ken, read Page 263 of the Explanation of the PPA. | |
| 12 December 2006 | |
| Thank you Solomon for pointing the way. As for D & T I don't know about death (I do not plan to join that for another 59 years), but I do know that TAXES ARE FUN! I followed your directions, and found exactly what I was looking for. Again, Thank You. | |
Death&Taxes (talk|edits) said: | 12 December 2006 |
| I was suprised that we had to go to the Committee reports to get the answer. Thanks for the interesting question!! | |
| 12 December 2006 | |
| Committee reports are one of the best reposititories of information which can be used on behalf of our clients. They are also among (IMO) the highest authorities, since they tell us what the people who write the laws were atempting to do.
I would like to know if there is any place on the interenet where committe reports for various code sections can be found. Perhaps even a place here, where we could have committe reports available or a link to them. Thanks again for the help. | |
| 1 April 2007 | |
| OK. Now down to the meat of it. Schwab reported a charitable IRA rollover in full as taxable. So how does the rollover take effect? The amount has to come off the top, right? 1099R says $15,000 total and $15,000 taxable, and I know for a fact that $5,000 went direct to a charity. So how is this reported? Havent' seen any others yet to compare. | |
Vermontcpa (talk|edits) said: | 12 October 2007 |
| so let me see if i have this straight... tp over 70 1/2 donates directly to qualified charity from ira distribution... so this creates NO TAXABLE amount on line #15b, no charitable deduction is taken on sch a, and it meets the rmd?
Assuming all of this is correct... in my client's scenario it could reduce his AGI down where he could take rental losses and not be limited on schedule A deductions. | |
Vermontcpa (talk|edits) said: | 13 October 2007 |
| Anyone confirm the above? | |
George Frampton (talk|edits) said: | 11 February 2008 |
| Instruction on 1099-R does NOT say to reduce box 2a Taxable amount by the amount of the charitable contribution distibution. Not much guidance here. Seems like its up to the tax preparer to reduce Box 2a. | |
Doris spencer (talk|edits) said: | 25 March 2008 |
| I am an individual taxpayer who contributed my minimum distribution to a qualified charity in 2007, the year Iturned 70 1/2. The check was made directly to the charity and not to me, as we were instructed, but I have re ceived a 1099 which gives the gross distribution of 15,500 in box one and the taxable amount of 15,500 in box 2, and the recipients name in the box is mine and not th charity - a school for autistic children. I am not sure how to handle this. I see that it is coded 7 as someone on the site noted was required..can anyone help? Thanks | |
| 26 March 2008 | |
| I have encountered a client using his IRA distribution directly paid to a charitable organization, never to him then to the organization. The distribution would not be taxable or the contribution being included on Sch A. The benefit of this is to keep agi as not to limit certain itemized deductions (medical, and miscellaneous deductions) I guess the best way would be to break up the 1099 and classify that portion with the proper distribution code which should mark next to it "QCD" (I think that is the acroynm Qualified Charitable Donation). | |
| 10 April 2008 | |
| Just had one - not noted anywhere on 1099 or on Charity papers. Makes a huge difference in taxability of Social Security benefits by eliminating both. | |
| 31 October 2008 | |
| Has anyone come to a conclusion or found definitive instructions regarding the presentation of the QCD - 1099 indicates code 7 & Boxes 1& 2 are the total 100K - We are planning on line 15a reporting full amount and line 15b reporting 0 w/ QCD in the space next to the line - & filing paper as we are Just doing 2006 & 2007, & do we or do we not have to love our timely clients? Happy Halloween! | |
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