Articles Tagged ‘Tax strategies’

Charitable Gift Annuities

Tuesday, December 28th, 2010

Presented by Avshalom Gad

Fundraising is the lifeblood of non-profits. When the economy is unsteady, as it has been for a while, these organizations must work harder than ever to maintain and expand donor contributions in order to advance their mission. The non-profits’ search for attractive ways to encourage donations has led to the rising popularity of Charitable Gift Annuities.

A “Win-Win” Situation
Many altruistic individuals express an interest in gifting assets to a non-profit they support. Yet, a common concern is that the donors themselves may need the assets personally, especially during retirement. A Charitable Gift Annuity (CGA) is an arrangement whereby the donor gifts cash or other assets to a non-profit in return for regular, guaranteed income payments for life. The contract is mutually beneficial: the charity gets a donation it may not have otherwise received, and the donor enjoys a tax deduction for a portion of the donation as well as guaranteed lifetime income.

The Risk of CGAs
As useful as they are for fundraising purposes, CGAs can be challenging for non-profit organizations to administer. Since a CGA promises to pay income to the donor for life, the non-profit must make sure there are always enough funds to meet its contractual obligations. Usually, the charity will invest the entire gift and not use any portion of the gift for its charitable endeavors until the payment obligation ends. Market risk can threaten the value of the organization’s investments. This is certainly happening now. And, the longevity of donors (and, hence, the number of years the non-profit must pay income to them) can erode the residual value of the gift – in some cases, leaving no gift at all for the non-profit.

Transferring the Risk
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Consider starting a new venture sooner rather than later

Friday, December 10th, 2010

This year, the government passed the Small Business Jobs Act of 2010 which temporarily increases the amount of start-up expenditures entrepreneurs can deduct from their taxes for this year from $5,000 to $10,000 (with a phase-out threshold of $60,000 in expenditures), offering an immediate incentive for someone with a new business idea to invest in starting up a new small business today.

The act also includes a few other incentives for small businesses:

The extension of bonus depreciation;
Extension and expansion of expending capital improvements;
One hundred percent gain exclusion for qualified small business stock;
Holding period reduction for S corporation built-in gain recognition rules;
Simplification for cell phone deductions;
Increase of the deduction for start-up expenses;
Retroactive relief from Code Section 6707A penalty;
Allowance of a deduction for healthcare insurance costs from self employment income subject to Federal Insurance Contributions Act (FICA) tax;
Extension of the carry-back period for eligible small business credits to five years; and the use of all general business credits to offset both regular and alternative minimum tax liability.
As you prepare for 2010 taxes, be sure to consider any tax savings you could get with your small business.

Summary of the Small Business Jobs Act

Brook M. Avey, CPA
President
www.brooksideaccounting.com
888-317-4835

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