6.1.4 Basic Quiz -- Sec. 72 and Charitable Gift Annuities

If a donor has some cost basis in the asset used to fund a gift annuity, a portion of the gift annuity payments will be tax-free.

True False

If an annuitant passes away before his or her life expectancy, the unreturned principal will be "donated" to the issuing charity.

True False

"Expected-return multiple" means the amount of principal expected to be returned to an annuitant out of the contract.

True False

A gift annuity is deemed to be a bargain sale.

True False

The 90CM life expectancy table is used to spread out the capital gain and tax-free amounts of a gift annuity payment.

True False

A gift annuity payment will always be all ordinary income.

True False

If a donor transfers $10,000 for a gift annuity and the deduction is $4,000, the value of the donor's interest in the gift annuity income stream is $6,000.

True False

The expected-return multiple is used both to calculate the life expectancy over which the capital gain and tax-free amounts of an annuity payment will be allocated and to determine the charitable deduction.

True False

Unrecovered return of principal refers to the amount of tax-free income that the annuitant will not receive if dying prior to his or her projected life expectancy.

True False

The tax deduction for unrecovered return of principal is a charitable income tax deduction taken on the decedent's estate tax return.