Charitable Gift Annuity Summary Report

[Kathleen Reynolds]

#4745

The program uses various Assumptions and Limitations to perform this particular calculation.

In terms of its calculations, the gift annuity is more complicated than any other split-interest charitable methods. The program calculations were designed based on research that consulted several sources. In particular, see Deferred Giving by Conrad Teitell and publications furnished by the Committee on Gift Annuities: Tax Implications of an Annuity Gift, and Deferred Gift Annuities.

Calculations will vary depending upon whether an annuity is considered to be immediate (the first payment date is one year or less from the transfer date) or deferred (the first payment date is more than one year after the transfer date). The program automatically handles the different calculation methods for immediate and deferred gift annuities.

The Committee on Gift Annuities recommends the use of its uniform gift annuity rates. These recommended rates are revised from time to time by the Committee. The recommended rates are intended to produce, on the average, a gift to the charitable organization of approximately 50% of the amount transferred to the charity. The uniform rates used by the program were adopted by the Conference on Gift Annuities on May 5, 1983 and were reconfirmed by the 19th Conference on Gift Annuities on May 1, 1986. As recommended by the Committee, the recommended rates for immediate annuities are also adjusted by a uniform interest factor for deferred annuities. As adopted by the Committee on Gift Annuities, the program uses a recommended payout rate for deferred gift annuities which is .5% higher than previously for Transfer Dates of 4/6/ 89 through 6/30/92. For Transfer Dates of 7/1/92 and later, the program uses a uniform interest factor for deferred annuities that is 1% higher than the period from 4/6/89 though 6/30/92.

The program performs a 90% test to see whether the annuitant’s investment in the contract equals or exceeds 90% of the principal. Less than 90% passes the test. If the test is failed, the charity will be taxed on income from the transferred property as unrelated business taxable income. The program handles Federal income tax consequences including capital gain treatment and partial payment years. Table V Expected Return Multiples (Reg. § 1.72-9) and appropriate adjustment factors are applied by the program to determine an exclusion ratio. The program, to determine the amount of the annual annuity that is excludable for income tax purposes as well as the amount that is taxable, uses this ratio. The printed report also shows detail for any partial payment that may occur in the year of first payment. If the fair market value of the property transferred exceeds the cost basis, the capital gain consequences are indicated. The printed report shows greater detail including any capital gain when there is a partial payment in the year of the first payment as well as the capital gain for the final reporting year.

[Author]

Posts