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Sunday May 19th, 2024

Attorney at Law | Certified Public Accountant | Licensed Real Estate Appraiser | Licensed Real Estate Broker

Since 1973

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Last Update
February 09, 2024

Certified Public Accountant

Donald J. Weiss, ESQ

As the tax laws become more complex, and the penalties for the business owner that does not adhere to these new complexities become more severe, it becomes critical for the business owner, officers and employees to have the best possible advice, and representation at their disposal.

As business owners, you are constantly multi-tasking. To keep your business viable you need to keep abreast of your market conditions, what your competitors are doing, the pulse of your clients and customers and the business climate that we all find ourselves in.

Having an accountant is essential, having a CPA is smarter, and having an attorney can save your financial life. Having all 3 in one just makes sense, and can end up saving you not only money, but your business if the winds go against you!

Charitable Annuity

I recently received a letter from my law school outlining various charitable givings.  They gave examples of a charitable gift annuity which is a very interesting program.  They gave examples of how economically it could work.  If you are considering making a gift to your Church, Synagogue or alma mater, a charitable annuity can really work well.

For example, suppose you have a single man, age 75, he could donate $100,000.00 to the charity, get a 6 ½% payback annually, or roughly $6,500.00 per year.  He would be able to deduct $38,394.00 on his tax return, so the gift itself would actually only cost $61,606.00 and he would get $6,500.00 for the rest of his life.  He would be getting roughly 9.9% on his investment for the rest of his life.  As long as he lives 11 years, at least he would get his money back and if he lives 15 years, he would get the equivalent of 1% return on his investment plus the charity received $100,000.00.  If he really wanted to make a mark, he could use that $100,000.00 and create a scholarship or endowment in his name, but that would be a personal choice.

Another example they gave was a husband and wife, ages 85 and 82, and they donate $50,000.00 to their alma mater with a 7% annual annuity.  Their charitable deduction is $20,553.00, so the net cost of the donation is 29,447.00.  They get $3,500.00 per month for the rest of both of their lives, whoever lives longer, which is roughly 13% return on their investment and their charity gets the $150,000 cash now.

I’ll put an extra twist on these donation concepts because if you were to donate highly appreciated stock, you get a deduction for the full amount of the value of the stock and you don’t pay capital gain tax.  So let’s say you bought DuPont stock back in the 1970’s and it’s now worth $100,00.00 – you might have a gain of $40,000.00 on which you would pay $9,000.00 in taxes.  If you would have donated that in the first example above, you would save an additional $9,000.00 in taxes and your charity would still have the full benefit of $100,000.00.

You could also do this with real estate that may have high built-in capital gains, say a house at the beach or even in Florida which is not likely in this economy to have high capital gains.  These are just a few thoughts I wanted to pass along to you.  I’m not trying to encourage you to make donations, but if you were thinking about it, this is a better way of doing it.  In addition, if you were thinking about donating several hundred thousand dollars, and you wanted to keep some control over the direction of the donation until you die, you could create your own private foundation which gives you the ability to direct how the money is used and permits your heirs to direct it after your death.

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