|
Saturday, April 27, 2024
 |
Case Studies |
Ralph - The Major IRA Donor
|
Case:
Ralph is a retired investment advisor. He watched his IRA blossom and grow through good investments. It now was the largest asset in his estate. Based on his age of 79 and the increased value, his required distribution this year was nearly $100,000!
Question:
Ralph is a frequent volunteer for his favorite charity and wants to make a major gift to a special project. In October, he decided that he did not actually need the distribution for this year. With the growth of his IRA, it was logical to make the gift from his IRA. But how can this work? Is this a good tax planning strategy?
Solution:
Ralph contacted his CPA Susan Johnson to discuss the best way to make his major gift. Susan explained to Ralph the benefits of making a tax-free IRA charitable rollover. By not taking the $100,000 into his income, Ralph could keep his adjusted gross income lower and benefit in three ways. First, his personal exemption would not be phased out at the higher adjusted gross income level. Second, he would not lose the 1% of his itemized deductions at that level. Third, his AMT exemption would not be phased out at the higher income level.
Ralph responded, "I don't understand all of that tax mumbo-jumbo, but it does make sense that with $100,000 less in adjusted gross income, my return will be easier to complete. Plus, there are those other savings that you mention. This sounds like a great idea!'
The next day, Ralph contacted his IRA custodian and had the full $100,000 IRA payout sent to his favorite charity. He and his CPA Susan were both delighted - Ralph made a wonderful gift and his tax situation was simplified.
|
|
|
|
