IRS Substantially Revises Form 5227, Split-Interest Trust Information Return; New Time Estimate for Records, Review, and Return Preparation Exceeds 136 Hours! www.irs.gov
The IRS substantially revised Form 5227, Split Interest Trust Information Return, for 2007 to reflect changes made by the Pension Protection Act of 2006. Prior to 2007, split interest trusts were required to file both Forms 1041-A and 5227. Now much of the information formerly included on the Form 1041-A has been incorporated in Form 5227. In addition to changes to the form, the Pension Protection Act of 2006 revised penalties for the failure to file or the failure to file complete and accurate returns, as well as penalties of trustees. Form 5227—excluding Schedule A listing donor/income beneficiary names—is now open to public inspection.
Treasury Issues Final Regulations on Information Return Required for Gifts of Qualified Intellectual Property, T.D. 9392; 73 F.R. 18709-18710 (7 April 2008), www.irs.gov
In the American Jobs Creation Act of 2004, Congress limited the charitable deduction for gifts of qualified intellectual property (such as patents, royalties, and trademarks) to the lesser of the property’s basis or its fair market value in the year of gift. If the donor notifies the charity of his intent to treat the gift as qualified intellectual property, he may deduct the qualified donee income (QDI) generated by the property over the next ten years in a scaled amount beginning at 100% of QDI and dropping to 10% of QDI by year 11. Charities must file Form 8899 over the period; the final regulations cited above detail the information charities must include on that form.
Treasury Issues Interim Guidance on Bundled Investment Management and Advisory Costs Following Decision in m Notice 2008-32; 2008-11 IRB 1
The United States Supreme Court, in Michael J. Knight, Trustee of William L. Rudkin Testamentary Trust v. Commissioner, 552 U.S. ___, 128 S. Ct. 782 (2008), determined that investment advisory costs—and other specified expenses—are subject to a 2% floor for miscellaneous itemized deductions in estates and non-grantor trusts. Although Treasury will issue final regulations to reflect the court’s decision, these regulations will not be published before 2007 returns on due. One issue to be addressed in the regulations is the estate or non-grantor trust’s payment of the trustee’s in-house bundled fiduciary fees, a portion of which is subject to the 2% floor and a portion of which is fully deductible without regard to the floor. This interim guidance allows the deduction of the full amount of the bundled fiduciary fee in tax years beginning before January 1, 2008.
Act Now! American Council on Gift Annuities Lowers Rates Effective July 1, 2008, www.acga-web.org/2008rateshykt/ratesjuly08.html
In April, 2008, The American Council on Gift Annuities reduced recommended rates on current and deferred gift annuity contracts executed after July 1, 2008. The new rates assume a 50% residuum at the end of the annuity term, a 1% annual administrative fee, life expectancies based on the Annuity 2000 Mortality Tables for female lives with a two-year setback in ages, and an asset allocation comprised of 40% equities, 55% bonds, and 5% cash (estimated to generate a 5.75% annual return). Rates for single life, current pay annuities dropped from .2% to .8% as shown below. More than 97% of the charities in the country, including Advocate Healthcare Foundation, use ACGA’s recommended rates. Detail on the new rates can be found at the ACGA Web site.
|
Age |
Current Rate |
New Rate |
|
50 |
5.3% |
5.1% |
|
60 |
5.7% |
5.5% |
|
70 |
6.5% |
6.1% |
|
80 |
8.0% |
7.6% |
|
90+ |
11.3% |
10.5% |