WSJ article
In today’s WSJ page B2 , Kelley Greene.s column the question was about Qualified Charitable Distributions. Ed Slott was asked to summarize the rules which he did well. My question has to do with his last comment.
The setup is.. “If you are planing to give money to charity this yr and you have already have taken your RMD you may still want to consider your IRA as the source of thee funds. ED goes on to say” That is because it is typically more to your advantage to give away tax deferred investments rather than those on which you have already paid taxes”
Here are my problems with this statement and I’d like other commentary as well..
If I had 100,000 sitting in an IRA and another 100,000 in a NON IRA and I wanted tp donated one or the other to charity my analysis would be some thing like this..
From IRA …. this will increase my AGI by 100,000 which will , like a pinball machine cause all types of bells and whistles to go off ( a favorite Slott saying) … I’ll get lower medical deductions, worse phase outs, higher 2% floor etc… Yes I can deduct the 100,000 but raising the AGI is a bad thing..
Further by taking from IRA I forgo future tax deferral that I other wise would of had if I left it in..
From non IRA…. I dont raise my AGI which is a good thing…. I will get a 100,000 deduction….and I dont interrupt that precious tax deferral inn the IRA..
Remember this example assumes I have already done my max QCD .. For simplicity let’s assume in either case I have enough agi allow me to deduct the 100,000 in a few yrs ..
So where was Ed coming from in saying the IRA is the better choice.. Can someone please explain..
Thanks
Permalink Submitted by Alan Spross on Sat, 2008-10-25 22:09
Chuck,
I think the key here is that Ed is referring to the benefit of the QCD vrs a post distribution gift, not the benefit of additional gifts that would require a taxable distribution. Note that having already taken the RMD does not eliminate the option of the QCD. It’s just that this QCD will not have the added benefit of fulfilling the RMD, but it still has other benefits that you have alluded to. Perhaps Ed is assuming that many taxpayers got tired of waiting for Congress and took all or part of their RMD, and now they find out that the QCD has been extended two more years.
In your example, the QCD is already done and therefore you are contemplating additional lifetime charitable gifts funded by IRA distributions vrs taxable savings. You are both correct, but are referring to slightly different situations.
Permalink Submitted by charles lore on Sat, 2008-10-25 22:47
I”ll agree that Ed’s comment must have assumed there was more QCD to go after the RMD was covered unlike my example. In a short column theres not enough space to expand the details..
Ed would be last one to want to set off the ago pinball machine.