Feeling Philanthropic? Avoid Splitting Property Among Charities
Tax Tip:
When you make a bequest of property to a charity, its value is exempt from estate tax. However, according to the U.S. Tax Court, that may
not be the case if you split an asset between two or more charities.
In one case, a donor left her 100% interest in a limited liability company (LLC) to two charities: 75% to a private foundation and 25% to a church. When she died, the LLC, which owned an interest in a mobile home park, was valued at just over $25 million. On her estate tax return, her estate deducted the LLC’s full value as a charitable donation.
The court agreed with the IRS that fractional interest discounts should be applied to each charity’s gift, reducing the combined charitable deduction by more than $4 million and triggering nearly $1.7 million in additional estate tax. To avoid this result, donors should consider leaving an asset to a single charity, such as a private foundation, and allow the foundation to determine its ultimate disposition.
This material is generic in nature. Before relying on the material in any important matter, users should note date of publication and carefully evaluate its accuracy, currency, completeness, and relevance for their purposes, and should obtain any appropriate professional advice relevant to their particular circumstances.
Share Post:
