3.3.2 Basic Quiz -- Current (Immediate) Gift Annuities

A gift annuity is a contract between a donor and a charity.

True False

A gift annuity is treated as a bargain sale of property to the charity.

True False

The exclusion ratio in a gift annuity is the amount that is not subject to ordinary income taxation.

True False

The more elderly the gift annuitant, the lower the exclusion ratio.

True False

If an annuitant funds a gift annuity with appreciated property that is long-term capital gain, part of each annuity payment will be taxed as capital gain until the annuitant passes away.

True False

If a donor funds a gift annuity for himself or herself and another person who is not a spouse, the donor will not be able to spread out the capital gain over his or her life expectancy. Instead, the donor will have to report all of the capital gain in the year the gift annuity is funded.

True False

When a donor funds an annuity for another person and the donor is not an annuitant, the capital gain must be reported in the year the gift annuity is funded.

True False

If the donor transfers ordinary income property in exchange for a gift annuity, part of the prorated gain he or she reports from the gift annuity will not be taxed as capital gain, but will instead be taxed as ordinary income.

True False

If the donor desires a higher charitable deduction for creating a charitable gift annuity, then it is best to use the highest Applicable Federal Rate.

True False

If a gift annuity is funded with an appreciated asset and the donor does not know his or her cost basis in that asset, the donor can just use the best estimate or guess of what the cost basis in that asset is.