A client plans to make year end gifts. He believes that the latest round of tax law changes means that he can make a tax free contribution of up to 100K out of his traditional IRA through 1/31/11. He is a very wealthy man as both he and his wife "come from money" and are retired from high paying jobs.
First question, is he right about the law?
Second question, what should I be thinking about in terms of whether he would get the most tax benefit by making a donation before Saturday out of funds on hand or a donation any time before THAT deadline out of IRA funds? I do not know how much he is planning to donate but I believe the amount of the donation will not be affected by the funding source. If it matters, he has taken his RMD for 10 and would not have taken a dime if he had not been forced to.
I am in the process of working out whether the 50%/30% limitations on charitable contributions are in play here but if so then it looks to me as though the IRA would be the way to go. (Now I have a question - the contribution from the IRA is excluded from income but it is not deductible on Sch A is it? If it were there would seem to be no question the IRA is better.)
Assuming the charitable limitations are not in play, it looks to me as though the only difference is whether he would like to have tax savings now by giving out of what would otherwise be taxable income or tax savings for the future by giving out of money that would eventually be taxed but now will not be.
First question, is he right about the law?
Second question, what should I be thinking about in terms of whether he would get the most tax benefit by making a donation before Saturday out of funds on hand or a donation any time before THAT deadline out of IRA funds? I do not know how much he is planning to donate but I believe the amount of the donation will not be affected by the funding source. If it matters, he has taken his RMD for 10 and would not have taken a dime if he had not been forced to.
I am in the process of working out whether the 50%/30% limitations on charitable contributions are in play here but if so then it looks to me as though the IRA would be the way to go. (Now I have a question - the contribution from the IRA is excluded from income but it is not deductible on Sch A is it? If it were there would seem to be no question the IRA is better.)
Assuming the charitable limitations are not in play, it looks to me as though the only difference is whether he would like to have tax savings now by giving out of what would otherwise be taxable income or tax savings for the future by giving out of money that would eventually be taxed but now will not be.
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