Maximize Your Tax-Free IRA Rollover Opportunities

Hoofer Sailing ClubIn January of 2011 a donor made a direct rollover of $40,000 from her IRA to a qualified charity under a provision of the 2010 Tax Act permitting such rollovers to be attributed to and treated as if made in 2010.

She recently inquired whether her earlier gift would reduce the maximum allowable tax rollover of $100,000 in 2011 by her earlier gift of $40,000. In other words, is she now limited to a maximum rollover of $60,000 in 2011?

The good news: No, she is not. The donor can make a direct tax-free rollover gift from her IRA of up to $100,000 maximum allowable during the remainder of 2011.

As we move into the second half of 2011, it’s an opportune time to point out that tax-free direct rollovers from IRAs to qualified charitable organizations have proved to be a very popular way to make large or small cost-effective charitable gifts.

To qualify for favorable tax treatment, you must be 70½ or over; the gift, up to a maximum of $100,000, must be a direct transfer from your IRA to our organization; and it must be an outright gift. Gifts to charitable remainder trusts, donor-advised funds, and support organizations do not qualify.

Please note that this planning opportunity, which was introduced in 2006, is set to expire at the end of 2011. Although it has been renewed several times since its inception, there is no certainty that it will be extended again this year.

Benefits of Low Discount Rates

The IRS announced that the discount rate used to compute the charitable deduction produced by various split-interest gifts is 2.4% for July of 2011. This low rate significantly increases the income-tax deduction generated by certain gift arrangements (e.g., gifts of remainder interest in a personal residence or farm, gifts of income interests in charitable trusts and gift annuities, and charitable lead annuity trusts).

We are at your disposal to discuss any of these attractive charitable gift opportunities. Please let us know if we can assist you in any way.

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