May 20, 1999 | Read Time: 2 minutes
Donors who set up certain kinds of planned gifts this month and next can take advantage of a special offer from the Internal Revenue Service: They can use more-generous rates for calculating the charitable tax deductions they can claim, even though those rates were officially replaced with new rates on May 1.
The two-month grace period was announced as part of the I.R.S.’s new regulations for calculating the size of tax deductions on certain kinds of planned gifts — such as charitable remainder trusts — based on revised mortality tables. The tables, which are updated every 10 years, were revised to reflect the fact that people generally are living longer.
The adjusted tables tend to produce smaller deductions, in part because donors are expected to receive payments or other benefits from their planned gifts over a longer period of time, thus reducing the amount of the gift that ends up going to charity.
The ability to use the old tables for calculating the charitable deduction could make a significant difference for some donors.
For example, by using the old mortality rates and the April interest rate of 6.4 per cent, a 70-year-old donor who sets up a $100,000 annuity trust paying 7 per cent in quarterly installments would get a one-time deduction of $42,627, according to Marc D. Hoffman, editor-in-chief of the Planned Giving Design Center Web site (http://www.pgdc.net). The same gift, made after June 30, would result in a $40,772 deduction, according to Mr. Hoffman’s calculation.
Still, donors need to keep in mind that other variables also play a major role in determining their deductions. For example, fluctuations in the interest rates set by the I.R.S. each month could offset the difference between the old and new mortality rates.
The rules were published in the April 30 issue of the Federal Register, Pages 23,187-229. They can also be found by following the instructions for reading the Federal Register on a government Web site at http://www.access.gpo.gov/su_docs/aces/aces140.html.
