This year is shaping up as yet another cliffhanger for
investors who want to take advantage of the popular IRA charitable rollover
provision, which in the past covered donations of up to $100,000 by people ages
70½ and older. Congress is likely to extend the expired rule, as it has on
multiple occasions, but not before the November election.
One advantage of making gifts this way has been that it
lowers adjusted gross income, which can help to lower Medicare premiums.
The safest route is to wait awhile to see if Congress acts.
However, if lawmakers follow the pattern of past years and restore the break
retroactively to its expiration, a direct transfer made now would qualify for
the favorable treatment. If Congress doesn’t extend the expired rule, you would
have a taxable IRA distribution but also a deductible charitable gift to report
on your 2014 return.
The uncertainty about the tax break for charitable IRA transfers
can complicate decisions about how much cash to withdraw from IRAs. For
instance, if you want to withdraw no more than your required minimum
distribution for 2014 and hope to make a direct charitable transfer later this
year, you may want to limit cash withdrawals now.
In the previous year-end nail biter, Congress on Jan. 1,
2013, restored the IRA gifting rule retroactive to Jan. 1, 2012, and lawmakers
provided some temporary relief for those caught in the year-end uncertainty.
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If a U.S. savings bond
is transferred by adding a person as co-owner, how long does that take to
process? Under whose Social Security number will it be cashed and taxed?
To add a co-owner to an existing paper bond, you will have
to exchange the bond for one in electronic form. That process typically takes
three weeks or so. If you authorize the co-owner to also make transactions
involving the joint holding on TreasuryDirect.gov, either of you can request a
redemption. The government will send a 1099 tax form reporting the income to
the person who requested the redemption.
Similarly, with a paper savings bond that already shows
joint owners, the bank at which the bond is redeemed will typically report the
taxable income to the person who cashes the bond.
However, the person who gets the 1099 may not technically be
the one who owes the tax. If you buy a bond and later add a co-owner, you are
the one responsible for paying tax on the income, regardless of who gets the
proceeds, says Internal Revenue Service Publication 550. In that case, the
individual who got the 1099 is supposed to prepare another 1099 that goes to
the IRS and to the person responsible for the tax.
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