IRA RMD and Charitable Contribution

[Burke]

In the TaxBook release of ATRA under Updates, page 22, concerning Charitable Contributions of IRA Distributions, it appears anyone who took an RMD last year can contribute the amt to charity before 2/1/13 and treat it as a direct transfer. In other words, no reporting on 1040 of the income and no deduction of the contribution. Is this the way you are interpreting it? It may affect numerous taxpayers whose RMD inclusion affects other items tied to AGI. And assuming these RMD's are reported via 1099R, do we show as gross received, but not taxable? Is there a special election which must be made so the IRS will know what the TP is doing? Likewise a direct transfer may be made in January and treated as made in Dec 2012, but these are less problematical since they aren't reported on 1099R.

[Roland Slugg]

I don't believe that is quite correct.

... anyone who took an RMD last year can contribute the amt to charity before 2/1/13 and treat it as a direct transfer.

In order to qualify the distribution must have been paid out to the IRA owner in December 2012, OR is (or will be) paid directly to the charitable organization by the IRA trustee in January 2013. Distributions made before December 2012 do not qualify for this special treatment.

Also, a qualifying charitable distribution is not limited to just the RMD. Any amount from $1 up to $100,000 can be handled this way, as long as the donor has reached the RMD age ... i.e. 70½.

Here's a link to an IRS web page explaining everything, including how to report such distributions on 2012 and 2013 tax returns:

http://www.irs.gov/Retirement-Plans/Charitable-Donations-from-IRAs-for-2012-and-2013

[New York Enrolled Agent]

In the TaxBook release of ATRA under Updates, page 22, concerning Charitable Contributions of IRA Distributions, it appears anyone who took an RMD last year can contribute the amt to charity before 2/1/13 and treat it as a direct transfer. In other words, no reporting on 1040 of the income and no deduction of the contribution. Is this the way you are interpreting it? It may affect numerous taxpayers whose RMD inclusion affects other items tied to AGI. And assuming these RMD's are reported via 1099R, do we show as gross received, but not taxable? Is there a special election which must be made so the IRS will know what the TP is doing? Likewise a direct transfer may be made in January and treated as made in Dec 2012, but these are less problematical since they aren't reported on 1099R.

Agree with Roland's interpretation

§208 of the Act contains in part:

(2) SPECIAL RULES- For purposes of subsections (a)(6), (b)(3), and (d)(8) of section 408 of the Internal Revenue Code of 1986, at the election of the taxpayer (at such time and in such manner as prescribed by the Secretary of the Treasury)--

(A) any qualified charitable distribution made after December 31, 2012, and before February 1, 2013, shall be deemed to have been made on December 31, 2012, and

(B) any portion of a distribution from an individual retirement account to the taxpayer after November 30, 2012, and before January 1, 2013, may be treated as a qualified charitable distribution to the extent that--(i) such portion is transferred in cash after the distribution to an organization described in section 408(d)(8)(B)(i) before February 1, 2013, and

(ii) such portion is part of a distribution that would meet the requirements of section 408(d)(8) but for the fact that the distribution was not transferred directly to an organization described in section 408(d)(8)(B)(i).

[Burke]

Ah, so..... When I read that summary, I read it as contributions made by December [31], which of course it does not say. The actual IRS code section wording is much clearer. Also, I did not mean to infer it only applied to RMD's, just that those who took them could use this new law to shelter it from the 2012 return.