IRA distribution to charity

[KJ Judd]

The Pension Protection Act of 2006 allows taxpayer to make a tax-free distribution to a charity. A client was proactive & made his minimum required distribution before the August enactment date. Now he wants to know if he can somehow reclassify his church charitable contributions as the straight to charity not taxed distribution.

(He's going to take the standard deduction this year. But the income will affect the amount of social security benefits that are taxable.)

I don't see anything that would allow him to reclassify this distribution. Did I miss anything?

[TAXBILLY]

Don't Think He Can

I belive the law says it must go directly from the IRA to the charitable organization.
taxbilly

[Unregistered]

Unfortunately, you are both correct. In this case, the early bird did not catch the worm. Here is part of the text of the legislation.

`(8) DISTRIBUTIONS FOR CHARITABLE PURPOSES-

`(A) IN GENERAL- So much of the aggregate amount of qualified charitable distributions with respect to a taxpayer made during any taxable year which does not exceed $100,000 shall not be includible in gross income of such taxpayer for such taxable year.

`(B) QUALIFIED CHARITABLE DISTRIBUTION- For purposes of this paragraph, the term `qualified charitable distribution' means any distribution from an individual retirement plan (other than a plan described in subsection (k) or (p))--

`(i) which is made DIRECTLY (emphasis added) by the trustee to an organization described in section 170(b)(1)(A) (other than any organization described in section 509(a)(3) or any fund or account described in section 4966(d)(2)), and

`(ii) which is made on or after the date that the individual for whose benefit the plan is maintained has attained age 70 1/2 .

New York Enrolled Agent

[Unregistered]

Can of Worms

The Vanguard Group mails the check to the donor made out to the payee. They then code the 1099R with code 7 - a normal distribution. To avoid taxation, their advice was "keep the paper work."

The IRA department of the IRS told me it should be coded as F.

After advising Vanguard of this, their response was that the IRS told their legal department to code it as a normal distribution with code 7. "Keep the paper work."

[Joe Btfsplk]

Contribution from IRA

Assuming a person had a RMD of $ 10,000 and wants to donate $3,000. If I'm interpreting it correctly, He could donate $ 3000 directly thru his broker, pay tax on $ 7000 of the IRA withdrawal--but would get NO deduction on Schedule A for the $ 3000.
He would satisfy the RMD requirement. and the $3000 would come off of page 1 of form 1040 rather than on Schedule A & page 2 of form 1040.

Am I missing anything?

[RLymanC]

Charitable IRA

I talked with a broker at citigroup-SmithBarney and was told a RMD distribution that has already been distributed for this year could be backed out and reclassified as a charitable contribution.

There is a form furnished by them to fill out. The donor authorizes the financial institution to make the check payable to “_________________” the check will then be forwarded to you personally to give the charity.

SmithBarney indicated the distribution code will be IKD with a trailer description “Charitable Contribution”

[jimmcg]

Contributions from IRA

You are not missing a thing, Joe. Under the Pension Protection Act of 2006 these qualified charitable contributions from IRA's will count towards the IRA owner's MRD for the year. Maybe the gov't is here to help us after all!