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May 21, 2009


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Phil Cubeta

A well informed and thoughtful friend emailed me to point out that with charitable remainder trusts and gift annuities and retained interest in a home the tax deduction for the gift is partial. The deduction takes actuarial factors into account to discount the deduction to reflect the fact that the charity will not receive the remainder interest until some time in the future. Yet, with foundations and donor advised funds, the donor gets a full tax deduction for the gift today, even if grants only flow to charity in a little trickle over a very long time.

"Make a law, make a business," as the saying goes. Out of that timing difference, or delay, between giving money tax deductably into a foundation or donor advised fund and gifting money out, many a money manageemtn business has been built. Grassley may be concerned about - or wanting to tap - these huge built up pools of tax-deferred charitable assets in donor advised funds and foundations. Why should the government fund the safety net? Why not force the charitable pools of tax deferred capital to do it? The politicians could take credit for holding the line on taxes.

The problem would be, though, that the donors might lose interest, or some would, in giving at all. And advisors and financial firms, not seeing a good honest buck in it, would fail to raise the philanthropic issues, and go back to other less genteel tax reduction strategies.

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