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As we mentioned in previous article, The federal government has creates a tax reduction program for people making donation to charities because giving money to charity provides many benefits to both the community and the donor, most people do not give much thought to developing a tax-effective strategy for charitable giving. Although many people make charitable bequests in their wills, other ways of giving may be less costly to them and their estates. In this article, we will focuses on the tax effectiveness of charitable donation at death.
This is for the taxpayer estate benefit and better position when donation of capital property rather than selling first and subsequently donating the cash proceed from the sale. At the date of death, the tax department deems that all property has been disposed for proceeds equal to the FMV, unless the property is transferred to the spouse.
1) Donation of life insurance
Taxpayers may be eligible to receive a donation credit when they donate the proceeds of an insurance policy if the policy is absolutely assigned to a charity.The amount eligible for the donation tax credit include
a) the cash surrender value of the policy.
b) Accumulated dividends and interest at the time of the transfer.
c) The amount of any future premium payments.
2) Donation of residual interest in a trust or estate
Taxpayers may transfer their property to an irrevocable trust and then name a charity as the capital beneficiary so they can receive a donation tax credit equal to the FMV of the trust's residual interest. This transfer can be done
a) During the taxpayer's lifetime.
b) Upon their death.
The amount of the receipt issued by charitable organization will be the present value, at the time of transfer, of the amount of donation.
3. Gifts of cultural property
Donations of cultural property can be claimed to the extent of 100% of net income. Excess donations can be carried forward five years. If the donation is made in the year of death, the donation credit can be carried back one year, to the extent of 100% of net income.
4. Ecological gifts
The donation gift credit is also available for gifts of a covenant or an easement or servitude for ecologically sensitive land. The FMV of this type of donation or gift is considered to be the greater of
a) The fair market value otherwise determined
b) The amount by which the fair market value of the land to which the gift relates is decreased as a result of the gift.
I hope this information will help. If you need more information, you can read the complete series of the above subject at my home page:
http://lifeanddisabitityinsuranceunderwriter.blogspot.com/
http://charitabledonationandtaxi.blogspot.com/
http://charitabledonationandtaxii.blogspot.com/
