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Recent Commentary

Sale of Farm Equipment

Thursday, November 30, 2023
Historical

A CRT defers taxes upon the sale of farm equipment and provides cash flow to donors.

Charitable Remainder Trusts and the "Simplified Method" for Reporting the Section 1411 Net Investment Income Tax

Tuesday, March 4, 2014

In 2010, Congress enacted the Health Care and Education Reconciliation Act of 2010, creating new IRC § 1411, which imposes a 3.8% surtax on the net investment income of individuals, estates, and trusts. In December 2012, the IRS issued proposed regulations that included a method (the Simplified Method) for charitable remainder trust (CRT) trustees to capture and report net investment income to the trust's non-charitable income beneficiaries. Final regulations issued in December 2013 took a different approach, but in new proposed regulations issued at the same time, the Simplified Method was retained as an alternative election.

The Simplified Method works as a complement to the pre-existing "four-tier" structure used by CRTs for income tax reporting. Under the Simplified Method, all net investment income (NII) received after December 31, 2012, is aggregated on a cumulative basis and distributed before excluded income. A trustee should consider electing the Simplified Method when the trust's income beneficiaries do not meet the applicable modified adjusted gross income threshold or when the trust has realized or realizable capital losses coupled with a short expected remaining term.

Investment in Foreign Currency

Thursday, November 23, 2023
Historical

Once the revaluation occurs, Harry should consider contributing the dinars to a CRT, of which Harry and Wanda are income beneficiaries, before he sells the dinars. Gain on the sale of dinars by the CRT is not recognized for tax purposes because the CRT is a tax-exempt entity. Thus, Harry could defer the tax consequences of the sale, and pay income taxes only when he and Wanda receive payments from the CRT. Further, certain types of CRTs may provide greater opportunity to regulate the timing and flow of income to our donors and to grow assets tax-free.

PERFECTING DONOR INTENT: Legal Lessons and Practical Advice

Wednesday, October 22, 2014

Recent lawsuits and court orders have forced charities, planners, and donors to reevaluate the best way to preserve donor intent. This article highlights two issues for donors and gift planners: the practicality of placing narrow, binding restrictions on gifts and the need for flexibility when economic, social, or environmental factors make the original gift terms impractical. This article defines the issues, explores recent case studies involving donor intent, details options when things go wrong, and provides guidance for planners and charities in drafting gift agreements.