Support a cause that's important to you with a charitable gift and help our organization fulfill its mission for many years and generations to come
ExampleCurrently, nonprofits must issue donors a contemporaneous written acknowledgment of donations for donors to substantiate their charitable deductions with the IRS. The Act would impose new requirements on the contemporaneous written acknowledgement. The new acknowledgement would report the amount of proceeds from the sale of any noncash assets donated to the DAF and inform donors that their charitable deduction must not be greater than that amount (rather than the value of the asset at the time of donation). An acknowledgment will be considered "contemporaneous" if it is provided "within 30 days of the date that the gross proceeds from the sale of the asset are credited to the account or fund of the taxpayer.
In 2019, Daniel received a large employee bonus from his pharmaceutical research company after helping develop an effective new allergy medication. He wanted to use some of his money to help those suffering from asthma and allergies, but he also wanted time to research nonprofits before giving. Daniel was looking for an immediate tax deduction to offset his income for the year. He spoke to his accountant, who recommended a DAF. Daniel could donate appreciated closely held stock to a DAF, receive an income tax deduction in the year of the gift and bypass any capital gain taxes he would have had to pay if he had sold the stock himself. Daniel could then advise distributions from the DAF to one or more nonprofits immediately or in the future.
Daniel set up the DAF with a local sponsoring nonprofit and advised a distribution of $40,000 of the funds to a pediatric allergy research nonprofit a year later. He can make more distributions as he pleases. The day Daniel donated the closely held stock to charity, it was valued at $75,000. When the nonprofit sold the stock, it was valued at $72,000. Daniel received a deduction for the stock of $75,000, the value on the date he made the gift.
In 2022, assuming the ACE Act is enacted, Daniel decides he would like to create another DAF with a different sponsoring organization. This time the DAF would be structured as a qualified DAF under the ACE Act. His advisory privileges for the DAF will expire within 15 years. At the time of his contribution, he must designate a preferred nonprofit as the beneficiary in the event he fails to direct the distribution of all the DAF funds within the time frame. He again donates closely held stock valued at $75,000 on Dec. 20, 2023. The nonprofit sells the stock on Mar. 15, 2024, when it has dropped in value to $72,000. Daniel receives a deduction in 2024 in the amount of $72,000. The acknowledgment from the nonprofit Daniel in the prior example must be provided within 30 days of the sale date on Mar. 15, 2024.
Rebecca is a successful businesswoman in the fashion industry. In 2023, she donates her vacation home to a DAF sponsored by a qualified local community foundation. On the date of donation, the home was valued at $950,000 as determined by a qualified appraisal. The sponsoring organization followed its normal protocol of requiring approval of the Board of Directors before listing the property. The Board did not meet until 8 months after the property was donated. The home was put on the market shortly thereafter, but the housing market had experienced a downturn. The property sold four years later for $750,000. Under the ACE Act, Rebecca receives a deduction of $750,000 in 2027.
ExampleBecause DAFs are often funded with both cash and nonmarketable assets over many years, tracking the "first in-first out" amounts and matching those to the distributions will be complex, especially for foundations with large numbers of DAFs.
Oliver is a wealthy entrepreneur and sailing aficionado. He establishes a DAF at a community foundation that focuses on ocean wildlife and conservation causes around the United States. Assume the ACE Act is in effect. Oliver donates a yacht valued at $1 million to a DAF in year 1, stock valued at $3 million in year 2 and a cash gift of $500,000 in year 3. His total gifts equal $4.5 million over 3 years. The DAF sells the yacht three years after it is received for $850,000 and the stock for $3 million the same year it is received. Oliver will be able to deduct $4.35 million in total over a period of 50 years, but deductions corresponding with distribution amounts must be taken in the years a distribution is made from his DAF. In year 6, Oliver advises a distribution of $1 million to a nonprofit that specializes in researching coral reefs. Oliver can take a $1 million charitable deduction on his income taxes in year 6. Based on the first in, first out rule, and not including any interest earned, $850,000 will be attributed to have come from the sale of the yacht and the remaining $150,000 from a portion of the stock sale.
A charitable gift annuity is a great way you can make a gift to our organization and benefit. You transfer your cash or property to our organization and we promise to make fixed payments to you for life at a rate based on your age.more
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