Saturday April 20, 2024

Rev. Rul. 69-63

GiftLaw Note: Gifts of tangible personal property to a charitable remainder trust do not qualify for an immediate charitable deduction. In Rev. Rul 69-63 donor contributed two assets to a charitable remainder trust. The first asset was a rare coin collection and the second asset was cash. The trust was to hold and exhibit the rare coin collection to the public for an admissions charge. The income from the trust would be paid to donor with the remainder in the trust left to charity. The IRS held that the rare coin collection was not a medium of exchange and therefore, it was tangible personal property. A gift of a future interest in tangible personal property is made only when all of the donor's intervening interests are extinguished. That is, when the donor's right to the actual possession or enjoyment of the property has expired. Because the trust is going to hold the coin collection, no deduction is allowable until the coin collection is sold. With regard to the cash, an immediate deduction was allowable.

26 CFR 1.170-1: Charitable, etc., contributions and gifts; allowance of deduction.

The transfer of a coin collection to a trust with a retained life interest in exhibition fees and remainder to charities is a transfer of a future interest in tangible personal property for which a contribution deduction is not allowable in the year of transfer.

REV. RUL. 69-63

A taxpayer created an irrevocable trust and transferred to the trustee a collection of rare coins and 1,000x dollars in cash. It was the taxpayer's intention that the rare coin collection be placed on exhibit for viewing by the public with a fee charged therefor. Under the terms of the trust agreement the trustee is to pay the income earned from the trust property to the taxpayer for life with the remainder to be distributed to a specific charitable organization of the type described in section 170(c)of the Internal Revenue Code of 1954.

Section 170(f) of the Code provides, in part, that payment of a charitable contribution that consists of a future interest in tangible personal property shall be treated as made only when all intervening interests in, and rights to the actual possession or enjoyment of the property have expired or are held by persons other than the taxpayer or those standing in a relationship to the taxpayer described in section 267(b) of the Code.

Held, since the collection of rare coins was not held primarily as a medium of exchange but instead has acquired added value as collector's items, the collection is tangible personal property for purposes of section 170(f) of the Code and a charitable contribution was not made at the time of the transfer to the trustee. On the other hand, the 1,000x dollars in cash is not tangible personal property for purposes of section 170(f) of the Code and the present value of the remainder interest in this cash is deductible as a charitable contribution in the year of transfer to the trustee.

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