Hello –
I have read Ed’s articles in Investment News and Morningstar regarding the mega qualified charitable distribution. Among other things, Ed has said that, for 2021, charitable contributions may be made for up to 100% of AGI. Accordingly, a client may do the up to $100k QCD from an IRA, PLUS “allowing unlimited distributions from any retirement account (not just IRAs) to be given to a charity for a 100% tax deduction for those itemizing deductions.” This is for cash gifts (not appreciated securities). As Ed also said, “The ability to use unlimited amounts of funds in IRAs or company plans to give to charity and receive a 100% deduction (or up to 100% of AGI) will be a huge tax benefit for those who would normally make large charitable gifts but are not able to maximize the tax benefits.” Again, this is applicable for cash gifts to charity, and does NOT qualify for DAFs or gifts to other supporting organizations.

I have a client (H & W) worth around $40M. We’ve been working w/ them and an estate planning attorney regarding various planning for their estate and finances. Among other things, the clients want to engage in chartable planning; specifically, to Temples and Churches (it is likely these entities are entirely, or substantially, 501c3 organizations). The Husband has to take $218k in RMDs from his Profit Sharing Plan, along w/ the Husband and Wife having to take RMDs from their IRAs (much less). It is likely that a charitable foundation will be established for the client (a DAF won’t work because they want the flexibility to contribute appreciated securities; a charitable lead trust won’t work as it locks the contributions to specific charities).

Question: How can we have the $218k RMD from the Profit Sharing Plan taken (it would be in cash since securities in the Plan would be redeemed) to maximize the mega QCD? In other words, can the $218k be sent to the client as his RMD, and then he turns around and contributes the $218k (cash) to one or more qualified charities to qualify for the $218k being a charitable deduction (the client does itemize). So I understand correctly as well, assume the client’s AGI is $1M. Thus, the $218k may be fully deducted (since the contribution would equate to 21.8% of AGI). I assume this gets an above-the-line deduction? Even so, it’s not a credit so the tax benefit would be the $218k multiplied by the marginal tax rate (assume 38.8% Federal), correct?

Please advise/confirm regarding the above, as well as if you can provide any supporting documentation for this (I know Ed references The CARES Act eliminating the prior 60% of AGI limit for 2020, and the Covid-related Tax Relief Act of 2020 extended this benefit thru the end of 2021 – w/ the AGI limit on tax deductions for $ gifts to charities 100% thru year-end.

Finally, will cash gifts be reduced to 60% of AGI in 2022, and what is the limit for appreciated securities (I believe 30% of AGI for $ and 20% for appreciated securities).

Thank you!

Jason