|
Sunday, April 28, 2024
 |
Case Studies |
Teacher Mary and the IRA Rollover Lesson
|
Case:
Mary Smith is a retired teacher. When she retired, she was given the option to rollover her retirement plan into an IRA. Since she wanted to have control over the investment of the IRA, she decided to rollover her retirement plan into a self-directed IRA.
Mary recently turned 71. She volunteers regularly for favorite charity and makes a gift each year of $2,000. This is a substantial gift for Mary. In order to make the gift, she must withdraw $2,000 from her IRA, report that amount in her income and then write a check to charity. Each year the charity must then give her a receipt, since the gift is over $250. She then reports and deducts the $2,000 charitable gift on her tax return.
Question:
Mary heard about the new IRA rollover option. She spoke with the development director at the charity and asked about using the IRA rollover to make her annual gift. The charity said that it is a public charity and would be qualified for the IRA rollover gift. Mary would merely need to contact her IRA custodian and have the gift transferred to her favorite charity. Is this IRA rollover gift possible? Is it a good plan for Mary?
Solution:
Mary contacted the large financial company that managed her IRA and was directed to the distribution form. She asked that the financial company make a "qualified charitable distribution" to favorite charity. The amount she selected was $2,000. The financial company transferred the $2,000 directly to favorite charity. The balance of her required minimum distribution was then distributed to Mary. She reported the IRA distribution to her on her tax return, but did not report the $2,000 gift to charity.
Mary loved the simplicity of the IRA charitable rollover. The $2,000 did not get reported on her income tax form and she did not have to itemize to take the deduction. The simplicity and convenience of this gift was a wonderful benefit for Mary.
|
|
|
|
