Sunday, May 5, 2024
Major/Current Gifts

2.1.2 Basic Quiz -- Gift of Mortgaged Property
A gift of debt-encumbered property to a charity is classified as a bargain sale.
     True      False
Donors who transfer debt-encumbered property to charity must pay ordinary income tax on the amount by which the debt exceeds the donor's basis in the property.
     True      False
If a donor refinanced last year, a charity can sell debt-encumbered property within one year of its acquisition without paying any taxes.
     True      False
For gifts of property to qualify for the "5 and 5" test, the debt-encumbered property must have been held by the donor for five years and the debt must also be at least five years old.
     True      False
If the "5 and 5" test has been met, the charity must sell the property as soon as possible to avoid unrelated business income tax.
     True      False
If the donor has not held the property for five years or the mortgage is not at least five years old, the charity will be unable to accept the property.
     True      False
Even though the donor has to recognize income on the debt relief, it may be possible for the tax savings on the gift to charity to offset the taxable gain on the relief of indebtedness.
     True      False
If the debt is against both the property and the owner personally, the debt is called non-recourse.
     True      False
A donor will realize greater tax savings for a gift of debt encumbered property if the debt is smaller in relation to the value of the property than if the debt is larger.
     True      False
When a donor transfers appreciated debt-encumbered property to charity, he or she may use the tax deduction up to 50% of adjusted gross income.
     True      False



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