Taxation & Legal Compliance Flashcards

The intermediate sanctions regime under IRC 4958 imposes:

Answer: Excise taxes on excess benefit transactions between public charities and disqualified persons, as an alternative to revocation

IRC 4958 imposes excise taxes on excess benefit transactions—where a disqualified person receives more than fair market value—as a proportionate sanction short of revocation of exempt status.

For a donor who contributes appreciated real estate to a public charity, which statement is correct regarding the income tax deduction?

Answer: The deduction is based on the property's fair market value, subject to a 30% of AGI limit, with five-year carryforward

Long-term appreciated real estate donated to a public charity generates a deduction equal to fair market value, limited to 30% of AGI, with any unused deduction carrying forward for five years.

Under the Tax Cuts and Jobs Act of 2017, which change most directly affected the utilization of charitable contribution deductions by middle-income donors?

Answer: The near-doubling of the standard deduction, reducing the number of taxpayers who itemize and can claim charitable deductions

The TCJA's near-doubling of the standard deduction dramatically reduced the percentage of taxpayers who itemize, eliminating the effective charitable deduction for millions of middle-income donors.

A charitable lead trust (CLT) is most advantageous for estate planning purposes when:

Answer: The 7520 rate is low, because the present value of the charitable stream is smaller and the remainder to heirs is larger than the IRS anticipates

CLTs work best when 7520 rates are low because the IRS values the charitable annuity at a lower present value, resulting in a larger taxable remainder transfer to heirs at a reduced gift/estate tax value.

The expenditure responsibility requirement applies when a private foundation grants to a non-public charity, requiring the foundation to:

Answer: Enter into a written agreement, require reports on use of funds, and report the grant on Form 990-PF

Expenditure responsibility requires the foundation to obtain written agreements from non-public charity grantees, receive reports on fund use, verify that funds are used for exempt purposes, and report on Form 990-PF.

When a donor contributes a qualified conservation easement on real property to a land trust, the value of the charitable deduction is based on:

Answer: The difference between the property's fair market value before and after the easement restriction

A conservation easement deduction equals the difference in the land's fair market value before the restriction (highest and best use) and after the restriction (limited use), determined by a qualified appraisal.