Part 45

Thomas M. Boles, 33, G.C.
Director of Development
La Habra, California

A “FLIP” unitrust can enhance your charitable giving.

Hi folks! Well, the “store” is open for another year of business, and since this entire issue of the Journal is devoted to Masonic philanthropies, I thought you might like to know a few important facts about the IRS rules relevant to charitable giving. We can thank Ron Dufek from the office of A. Charles Schultz, J.D., for helping me out.

The IRS has just released the final regulations on the substantiation and disclosure rules governing charitable contributions. These regulations cover charitable contributions that are partly for goods and services, the substantiation rules for charitable contributions of $250.00 or more (Code Sec. 170(f)(8), and the discloser requirements for quid pro quo contributions (Code Sec. 6115).

Intent To Make A Contribution

The final regulations follow a two-part test adopted by the Supreme Court (U.S. v. American Bar Endowment, 477 U.S. 105, 1986) which states that a charitable deduction is allowed (1) only to the extent that the amount of the payment exceeds the fair market value of the goods or services received by the taxpayer, and (2) the donor intends to make a payment in excess of the goods or services received. The regulations adopt a facts and circumstances test in each case that determines intent to make a gift.

A charitable organization provides goods or services “in consideration for” a taxpayer’s payment if, at the time of payment, the taxpayer receives or “expects to receive” goods or services in exchange. The preamble to the regulations states that the expectation of a quid pro quo may exist even though the donor is not aware of the exact nature of the quid pro quo, and gives an example of a donation to a charity that sponsors a donor appreciation event of a different type every year. Goods or services provided by the donee organization may include benefits provided in a year other than in the year of the contribution (Reg. Sec. 1.170A-13(f)(6).

Receipt Of Tickets To Athletic Events

When a payment to a college or university entitles the donor the right to purchase tickets to an athletic event, the final regulations state that 20% of the amount paid for the right to purchase the tickets is treated as the fair market value of the right. In other words, 80% of the payment is deductible with 20% treated as a good faith estimate of the value of this right. The substantiation rules covering contributions of $250.00 and above apply when the total payment for the right to purchase the tickets is $312.50 or more ($312.50 x 80% = $250.00).

Split-Interest Gifts

The final regulations state that the $250.00 substantiation rules do not apply to charitable remainder trusts and charitable lead trust. However, the substantiation rules do apply to Pooled Income Funds and Charitable Gift Annuities. To deduct a gift of a remainder interest of $250.00 or more to a Pooled Income Fund, the donor must have an acknowledgment from the charity stating that cash or other property was transferred to the fund and whether any goods or services, in addition to the income interest in the fund, were provided to the donor. If no goods or services were provided, the acknowledgment must so state, but it need not include a good faith estimate of the value of the income interest (Reg.Sec. 1.170A-13(f)(2),(13). As to effective date, the final regulations apply to contributions made after December 15, 1996. However, taxpayers may rely on them for contributions made after 1993.

Now that you know all this, why not call me and talk about securing your future by investing in a Charitable Trust. As I have said before: there are few investments that equal the return and tax savings of a Charitable Trust. Which leaves my “ad” for this month to read: If you know the rules of the game, you normally win.

Please Note: This information is distributed with the understanding that the author is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expertise is required, the services of a competent professional should be sought. From: A Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers.

To receive more information on the benefits of giving appreciated assets to the Scottish Rite Foundation, S.J., USA, print this web page, fill out the requested information, and mail to the address below:

For an investment of securities and/or real estate, please run a calculation and send it to me based on an investment of $__________. Assume the cost basis of the asset (what was originally paid, less depreciation) is $__________.

My birth date is _________________; My spouse’s is _________________.

Name ____________________________ Date _______________________

Address _______________________________________________________

City _________________________ State ________ Zip _______________

Send to: Scottish Rite Foundation, c/o Thomas M. Boles, 1761 East Woodcrest Avenue, La Habra, CA 90631-3260

Brethren Benefit From Pooled Income Fund
What is one of the better ways you can benefit yourself and your family and, at the same time, support the Scottish Rite and its Childhood Language Disorders Program? The answer is simple: The Scottish Rite Pooled Income Fund!

The Scottish Rite Pooled Income Fund allows you and, if you wish, your wife and/or other beneficiary(ies) to receive a worry-free lifetime income as well as attractive tax benefits by joining the Fund via a financial gift to The Scottish Rite Foundation, S.J., USA. For more information call, 1-800-486-3331 or fax 202-387-1843.

Grand Commander Kleinknecht will personally respond to your inquiry. If he is not available, please leave your name and number, and the Grand Commander will return your call at his earliest opportunity. Through the Scottish Rite Pooled Income Fund, you can do well for yourself and your family while also doing good for others!