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IRA Rollover Extended (Update)

On October 3, 2008, President Bush signed the $700 billion economic bailout bill, which includes a two-year extension of the IRA Rollover provision.

The provision will be made retroactive to January 1, 2008 and will apply to gifts made from that date through December 31, 2009.

Under this law, you can use funds from your IRA to make a lifetime charitable gift free of tax obligations. Prior to the law, you would have to report any amount taken from your IRA as taxable income, then take a charitable deduction for the gift, but only up to 50 percent of your adjusted gross income. In effect, this caused some donors to pay more in income taxes than if they didn’t make a gift at all.

Fortunately, these IRA gifts can be accomplished simply and without tax complications. Plus, you can make the gift now – while you are living and able to witness the benefits of your generosity.

 You May Contribute Funds This Way If:

· You are 70½ or older

·  The gifts do not total more than $100,000 per year.

·  You transfer funds directly from IRA or Rollover IRA

·   You make a direct gift to a public charity (no planned gifts).

How the Pension Protection Act Works: 

Betty, aged 75, has $290,000 in two separate IRA’s. She made a pledge to give $50,000 to us this year. She has a choice of giving cash, appreciated securities or other assets to fulfill the pledge. Betty checks with her tax advisor who explains that under the new law, she has yet another option to fund the pledge.

If Betty transfers $50,000 from one of the IRA’s directly to us before December 31, 2009, she will avoid paying income tax on the $50,000 withdrawal. She will not, however, be able to use it as a charitable deduction – it is a pure “wash.” It is an easy and convenient way for Betty to accomplish her charitable goals.

David retired from his career about 10 years ago and has been receiving retirement income ever since. Part of his income is in the form of minimum distributions from an IRA since turning age 70½.

Fortunately, with David’s other retirement funds and Social Security, he does not need the IRA distributions now or in the foreseeable future. Yet each year he has to take receipt of these minimum distributions to comply with the Internal Revenue Code and pay income tax even though he doesn’t need or want to receive the income.

Under this law, David can transfer the minimum distributions directly to us. His benefits are twofold: 1) He avoids paying income tax on the unwanted minimum distributions; and 2) he uses those funds to fulfill his charitable dreams. Instead of waiting until after his lifetime to leave his IRA funds to our organization, David can enjoy witnessing the benefits of his generosity now while he’s living and jump-start the legacy he always wanted to leave.

Questions and Answers: 
I have several retirement accounts, pensions and IRA’s. Does it matter which retirement account I use?

Yes, Gifts can be made from an IRA or Rollover IRA. Pension, profit sharing and other forms of retirement funds do not fall under the new legislation.

 Can I make a gift to a charitable remainder trust?

No. Only gifts made directly to public charities are eligible for the tax benefits.

 I’d like to give more than $100,000. How can I do that?

The legislation allows you to make a gift in the 2008 tax year and the 2009 tax year. So if you make $100,000 gifts in each year, you can give $200,000 over the two-year period. Plus, if you have a spouse aged 70½ or older with an IRA, he or she can give $200,000 over the same period.

For More Information: 

Please consult with your financial planner and/or tax professional if you are contemplating a charitable gift under this law.

Buddhist Churches of America

Campaign BCA – The 21st Century

2140 Durant Ave.

Berkeley, CA 94704

(510) 809-1453

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