For example, a donor’s IRA custodian mails to the donor a charitable IRA contribution check payable to a charitable organization. The check is mailed to the donor on December 29. The donor receives the check on December 31. The donor then mails the check to the charity on January 4. The charity receives the check on January 7. This is from an actual fact pattern.
Question: When is the gift complete for tax purposes? December or January?
IRS hasn’t answered this and other important charitable IRA questions. Why not? Because up until now, the IRA donation has been a temporary provision of the tax law; and IRS does not issue regulations on temporary tax law provisions.
IRS has issued some guidance on charitable IRA contributions in past years. The IRS has said, for example, it’s OK for the IRA custodian to send the check directly to the donor; but it hasn’t said when the distribution is deemed to be made in this situation.
IRS also has said an IRA gift may be used to pay a pledge, even an enforceable pledge. This is interesting given that a donor may not use his or her private foundation to pay an enforceable pledge (the foundation’s payment would be self-dealing).
Charities should have a policy and procedure for dealing with IRA gifts, including a policy for acknowledging such gifts. It’s also a good idea to develop a one-page “fact sheet” for IRA donors. The fact sheet should say, for example, that an individual may not use an IRA gift to pay for a gala dinner table.
If you need help dealing with IRA contributions (and if you do, you’ve got lots of company), reach out to a Sharpe Group representative.
by Jon Tidd
Sharpe has free postcards available for download as PDFs immediately that you can use to announce this provision news to your donors. Click here to download the PDFs.