Permalink Submitted by Kevin Calandro on Wed, 2008-10-15 17:44
I was told that this could be done in 2006 and 2007 but that this provision expired on December 31, 2007. Is anyone aware that Congress did pass this so that it can still be done in 2008?
Permalink Submitted by Alan Spross on Wed, 2008-10-15 18:09
Yes, this was part of the bailout legislation signed into law on 10/3/08. The QCD is now extended for both 2008 and 2009. The following is copied from a CCH report on the tax bill:
>>>>>>>>>>>>>>
Tax-Free Distributions from
IRAs for Charitable Purposes
The new law permits taxpayers to make
tax-free distributions from IRAs for
charitable purposes through December 31,
2009. This popular charitable contribution
option had expired January 1, 2008. The
maximum contribution limit for 2008 and
again for 2009 is $100,000.
Impact. This treatment applies to
traditional and Roth IRAs. However,
no charitable deduction is
allowed for any portion of these
withdrawals that would have been
otherwise taxable.
>>>>>>> >>>>>>>>>>
Permalink Submitted by Janine Janine on Wed, 2008-10-15 20:29
“However, no charitable deduction is
allowed for any portion of these
withdrawals that would have been
otherwise taxable.”
Alan…I do not understand that last statement. Would not any withdrawal from an IRA be taxable as ordinary income if it is not a qualified direct contribution?
Permalink Submitted by Alan Spross on Wed, 2008-10-15 20:54
Yes, but the statement means that the taxpayer making the QCD cannot also take an itemized deduction for the contribution because the contribution is made with pre tax funds. In addition, for a taxpayer with basis (8606) in the IRA, the QCD is deemed first to come from the pre tax funds, with the basis remaining unchanged.
Taking this to the logical conclusion, if the taxpayer donates so much that the pre tax funds are exhausted and basis therefore included in the transfer, then the basis portion would qualify for the itemized deduction. This is logical because the taxpayer has already paid taxes on that basis.
Permalink Submitted by Janine Janine on Wed, 2008-10-15 17:04
Yes, if it is a direct withdrawal (a check made out to the charitable organization) from the custodian to the qualified charitable organization.
Permalink Submitted by Kevin Calandro on Wed, 2008-10-15 17:44
I was told that this could be done in 2006 and 2007 but that this provision expired on December 31, 2007. Is anyone aware that Congress did pass this so that it can still be done in 2008?
Thanks again,
Permalink Submitted by Alan Spross on Wed, 2008-10-15 18:09
Yes, this was part of the bailout legislation signed into law on 10/3/08. The QCD is now extended for both 2008 and 2009. The following is copied from a CCH report on the tax bill:
>>>>>>>>>>>>>>
Tax-Free Distributions from
IRAs for Charitable Purposes
The new law permits taxpayers to make
tax-free distributions from IRAs for
charitable purposes through December 31,
2009. This popular charitable contribution
option had expired January 1, 2008. The
maximum contribution limit for 2008 and
again for 2009 is $100,000.
Impact. This treatment applies to
traditional and Roth IRAs. However,
no charitable deduction is
allowed for any portion of these
withdrawals that would have been
otherwise taxable.
>>>>>>> >>>>>>>>>>
Permalink Submitted by Janine Janine on Wed, 2008-10-15 20:29
“However, no charitable deduction is
allowed for any portion of these
withdrawals that would have been
otherwise taxable.”
Alan…I do not understand that last statement. Would not any withdrawal from an IRA be taxable as ordinary income if it is not a qualified direct contribution?
Permalink Submitted by Alan Spross on Wed, 2008-10-15 20:54
Yes, but the statement means that the taxpayer making the QCD cannot also take an itemized deduction for the contribution because the contribution is made with pre tax funds. In addition, for a taxpayer with basis (8606) in the IRA, the QCD is deemed first to come from the pre tax funds, with the basis remaining unchanged.
Taking this to the logical conclusion, if the taxpayer donates so much that the pre tax funds are exhausted and basis therefore included in the transfer, then the basis portion would qualify for the itemized deduction. This is logical because the taxpayer has already paid taxes on that basis.
Permalink Submitted by Janine Janine on Wed, 2008-10-15 21:02
Thank you, Alan. That clarifies it for me.