eGiftLaw Newsletter
| November 30, 2009 Dear Professional Advisor,
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| University of Northern Colorado Foundation, Inc. | November 30, 2009 | |
GiftLaw eNewsletter - November 30, 2009
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WASHINGTON HOTLINE IRS Explanation of Extended Home Buyer Credit Tax Quote of the Week "[A tax loophole is] something that benefits the other guy. If it benefits you, it is tax reform." -- Russell B. Long
IRS Explanation of Extended Home Buyer Credit The Worker, Homeownership, and Business Assistance Act of 2009 extended and expanded the home buyer credit. The credit is extended from November 30, 2009 until April 30, 2010. In addition, if a buyer is in a binding contract by April 30, 2010, he or she may close on the home by June 30, 2010 and still qualify. The maximum credit remains $8,000 for first-time home buyers. However, there is a new "long-time home buyer credit." For individuals who have lived in their home for five years, they may qualify for a $6,500 credit on purchase of a new principal residence. The credits for 2010 purchases may be used against either a 2009 or 2010 tax bill. There are several limits or requirements for the credit. For single persons, the modified adjusted gross income (MAGI) can be up to $125,000. Joint filers may have up to $225,000 of MAGI. The new limits apply for homes purchased between November 7, 2009 and April 30, 2010. There also are some restrictions. Dependents are not permitted to claim the credit. The maximum home price is $800,000 to qualify for the credit. Finally, because the credit had been claimed by individuals as young as age four in the past, any new purchasers must be at least age 18 to qualify. Individuals in the military who are on active duty will have one extra year to claim the credit. Active duty personnel can purchase by April 30, 2011, and still qualify. No Afghanistan War Tax - At Present At the White House press conference on November 23, 2009, spokesman Robert Gibbs was asked about a war tax to pay for the conflict in Afghanistan. He indicated that the question has come up but advisors "haven't gotten deeply" into an analysis of the issue. He did not exclude the possibility of a war tax in the future. Sen. Carl Levin (D-MI) indicated during a news interview this week that he would be open to a war tax on single persons earning over $200,000 and couples with more than $250,000 in income. Sen. Joe Lieberman (ID-CT) stated on a national network program that he also is in support of the concept. Sen. Lieberman noted that he proposed a war tax in 2007. House Appropriations Committee Chair David Obey (D-WI) has introduced the "Share the Sacrifice Act of 2010." The bill proposes a 1% additional tax on the first $11,300 in tax. There would be a higher percentage surtax for those taxpayers with payments up to $18,200. For individuals who have tax bills in excess of $18,200, there would be an even higher surtax. The surtax amounts would be calculated to cover the amounts of the Afghanistan war costs. Editor's Note: The discussion of a war tax shows the growing concern in Washington about the deficit. The size of the deficit may soon impact spending programs. A proposed solution is to match new taxes with specific programs. White House - Senate Budget Panel Meeting Senate Budget Committee Chairman Kent Conrad (D-ND) and the ranking Republican Sen. Judd Gregg (R-NH) have been jointly proposing the creation of a bipartisan budget panel. Both Senators met this week with White House Budget Director Peter Orszag to discuss the commission. White House officials did not comment on the outcome of the discussions but it appears that the proposal is receiving serious consideration. Sen. Conrad observes that the $1.4 trillion deficit in 2009 is a record level that has not been seen since World War II. White House Budget Director Orszag has already requested budgets for 2011 from various departments that could include reductions of up to 5%. Sen. Conrad and Sen. Gregg note that the current procedures for spending and taxation in the House and Senate are not likely to produce a desired reduction in the deficits. With the current pattern, it is quite possible that the deficits and the federal debt could expand significantly. Therefore, they propose that a bipartisan commission be given the ability to submit proposals on spending and taxation to the House or Senate. Under their proposal, the bills introduced by the budget commission could not be amended and would have to be voted up or down. Speaker of the House Nancy Pelosi (D-CA) and other senior Democrats have opposed the concept. However, 12 senators have indicated that they may force a vote on a budget commission when the government needs to expand the debt limit beyond the current $12.1 trillion. A mid-December vote to increase the federal debt limit will be necessary to keep the government functioning by permitting Treasury to borrow billions of dollars each week. The 12 Senators may attach their budget commission proposal to the bill to increase the debt limit. Applicable Federal Rate of 3.2% for December -- Rev. Rul. 2009-38; 2009-49 IRB 1 (17 Nov. 2009) The IRS has announced the Applicable Federal Rate (AFR) for December of 2009. The AFR under Sec. 7520 for the month of December will be 3.2%. The rates for November of 3.2% or October of 3.2% also may be used. The highest AFR is beneficial for charitable deductions of remainder interests. The lowest AFR is best for lead trusts and life estate reserved agreements. With a gift annuity, if the annuitant desires greater tax-free payments the lowest AFR is preferable. During 2009, pooled income funds in existence less than three tax years must use a 4.8% deemed rate of return. Federal rates are available by clicking here.
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PLR THIS WEEK PLR - 200926036 Organization Denied Exempt Status Organization was incorporated on D1. Organization conducts religious services out of a room in Hotel, a for-profit company, which incorporated one month after Organization. Hotel is owned by X through her limited liability company, of which she is the sole member. Organization asserts that about 90% of Hotel's guests follow Organization's faith and about 20% of all guests attend Organization's services. Although Organization is open to the public, the majority of Organization's attendees are Hotel guests. Hotel paid for the renovations of Organization's room and provides all furnishings. Organization relies entirely upon Hotel and X for support and funding and Organization's three governing body members are related to X. Organization's room is included in Hotel's advertising literature and is an amenity desirable to Hotel's guests. Furthermore, Organization does not have bookkeeping and accounting records separate from those of Hotel and its owner, X. The Service denied Organization tax-exempt status because Organization served private rather than exclusively public interests. Sec. 501(c)(3) requires tax exempt organizations be "organized and operated exclusively for [charitable] purposes...no part of the net earnings of which inures to the benefit of any private shareholder or individual...." Reg. 1.501(c)(3)-1(d)(ii) provides that an organization fails to operate for exclusively charitable purposes if it serves a "public rather than a private interest" and must establish it is not operated for the benefit of private interests such as designated individuals, the creator or his family...or persons controlled by such private interests. In KJ's Fundraisers v. Comm'r, T.C. Memo 1997-424 (1997), aff'd, 1998 U.S. App. (2d Cir. 1998), the Court denied an organization exemption because it served to attract customers for the related profit-making business. This benefit was not insubstantial for the company. Here, Organization engaged in nonexempt and prohibited activities as more than an insubstantial part of its activities are for the private interest of Hotel and X. Furthermore, Organization is controlled by X and Hotel. To view the full PLR Click Here.
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CASE OF THE WEEK Lucky Lucy Lindstrom's "Northern Lite Shot" Charity Lucky Lucy Lindstrom finished college and headed west. She started as a financial analyst with a large company in Seattle. After just four years, she became a Registered Investment Advisor (RIA) and began advising clients. Lucky Lucy also managed her own investments. With her keen insight into financial markets, Lucy soon began to move from traditional stocks and bonds into futures and commodities markets. Lucky Lucy was so successful in these markets that she now manages only her mega-dollar personal portfolio. Somewhat late in life, Lucky Lucy discovered the wonderful world of philanthropy. She volunteered at her favorite charity, and learned that giving someone in need a helping hand is even more gratifying than making another million in the futures market. Lucy had invested $1,000,000 in stock in a Canadian oil "wildcatter" with the name Northern Long Shot, Inc. This company has been drilling new exploratory wells in the far north. Recently, the stock rose from the $1 per share that she paid to over $5 per share. After this success, Northern Long Shot decided to "spin off" a smaller company with a portion of the successful wells. Lucy exchanged her $5 million in stock for 60% of the stock in Northern Lite Shot, Inc. After the exchange, Lucy decided to give the Northern Lite Shot stock to a private charitable foundation to help those in need. Lucy discussed options with her attorney. She asked her attorney about the ability of her private foundation to keep the Northern Lite Shot, Inc. stock. Her attorney noted that private foundations are subject to various rules on self-dealing, minimum distributions and excess business holdings. Lucy said, "Wow! There are a lot of rules for private foundations. So can my private foundation continue to own the Northern Lite Shot stock? To view the solution to this Case of the Week Click Here.
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ARTICLE OF THE MONTH New Decade Predictions – Part I "Predictions are difficult, especially about the future." Danish Physicist Niels Bohr
As the financial professionals and gift planners enter a new decade, what is likely to occur? While predictions are indeed difficult, by examining the past and the present it is possible to make several projections about the future. Part I of this article will discuss the economy and wealth, the impending tax increases on the affluent and the probable boom in financial counseling. Part II will analyze charitable financial planning options for the depression babies group and the baby boomers. The sections for each will include a prediction, an analysis of the factors surrounding that prediction, and an explanation of the likely impact on major and planned gift donors. To view the full Article of the Month Click Here.
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| Note:Case studies, articles, commentary and other materials in the GiftLaw system are included solely as educational information. Articles and editorial comments are offered as an educational service to friends of this organization, and may not always reflect our official position on any issue. Since case studies or articles may not always reflect the current AFR or tax law, it may be necessary to run any illustration with a current version of Crescendo to obtain updated information. If professional services are required, all persons shall consult with their qualified professional advisors. Tax Quotes are courtesy of Jeffery L. Yablon, Washington, D.C.
© Copyright 1999-2009 Crescendo Interactive, Inc. |
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| University of Northern Colorado Foundation, Inc. | November 30, 2009 | |
| Thank you for your interest in gift planning. To access any of this updated GiftLaw information, please select our web page by clicking here. Cordially yours, George O. Pickell University of Northern Colorado Foundation, Inc. If you do not wish to receive future emails, please click here to unsubscribe. Thank you. |
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