Sometimes Acknowledging a Gift is Not as Simple as It Seems
Posted February 1st, 2014

Sometimes Acknowledging a Gift Is Not as Simple as It Seems

When a donor makes a gift, the most important thing for a charity to do is to acknowledge the gift quickly with a letter, appropriate receipt and possibly a phone call or personal visit, depending on the size of the gift, its use and the charity’s resources.

But sometimes acknowledging a gift is not so straightforward. Consider these situations:

Q. A donor made a gift through a donor-advised fund. How should I acknowledge the gift?

The advised fund should be receipted for the gift. The donor who “advised” the gift should be acknowledged with a thank you letter, but the tax-deductible gift was made to the fund. The donor should not be given a receipt for the gift.

Q. When a donor gives from a revocable trust (sometimes referred to as a “living trust”), does the donor receive the tax benefits of that gift?

A. With a living trust, all the tax ramifications flow through to the donor and are reported on his or her individual tax return. A donor who makes a gift through a living trust should receive an acknowledgment for the gift and should report the gift as a charitable deduction if the donor itemizes. The revocable living trust does not file a separate return.

If the gift is instead made through the donor’s personal foundation, the acknowledgment would be made to the foundation as the foundation is a separate legal entity. Nothing would be claimed on the donor’s personal return.

If in doubt, it is important to contact donors to determine the nature of a particular entity. It can be difficult to distinguish between entities that are equivalent to the donor and those with a separate legal identity.

These questions and others are answered in Sharpe’s popular seminar “Gift Planning Fundamentals.”

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The publisher of Sharpe Insights is not engaged in rendering legal or tax advisory service. For advice and assistance in specific cases, the services of your own counsel should be obtained. Articles in Sharpe Insights may generally be reprinted for distribution to board members and staff of nonprofit institutions and other non-donor groups. Proper credit must be given. Call for details.

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