Section 208 of the American Taxpayer Relief
Act of 2012 (ATRA) permits individuals who have received an IRA distribution in
December of 2012 to make a cash gift prior to February 1, 2013 and still have a
qualified charitable distribution (QCD). Because there have been many
questions raised by individuals with specific circumstances, it would be useful
to examine several cases to determine whether or not a QCD is possible.
1. Partial IRA Gift
Question: Mary received her required minimum distribution (RMD) from her IRA in the amount of $22,000 on December 5, 2012. On January 15, 2013, she sends a check for $3,000 to her favorite charity. Does this qualify as a 2012 QCD?
Answer: Yes. Under ATRA Sec. 208(b)(2)(B), donors who received a December RMD may make a cash gift to charity and have that count as a 2012 QCD. The cash gift must be made after the donor took their December RMD but before February 1, 2013. The law allows a donor to transfer “any portion of a distribution from an individual retirement account” which means a donor can give less than the full amount of the RMD as a cash gift, in which case the amount of the cash gift will be treated as a QCD. Therefore, a partial gift such as the $3,000 transfer by Mary IRA is permissible and she can elect to have that treated as a 2012 QCD.
2. December Cash Gift
Question: Joe received an RMD of $10,000 on December 15, 2012. On December 18, he sent a check for $10,000 to his favorite charity. Can the cash gift be treated as a QCD for 2012?
Answer: Yes. The requirement of Sec. 208(b)(2)(B)(i) is that the cash gift must be made after a donor took their RMD but before February 1, 2013. A gift in December of 2012 meets those requirements.
3. November 28, 2012 Distribution
Question: John received his 2012 RMD on November 28, 2012. He would like to transfer $10,000 of the $41,000 RMD as a cash gift to charity in January of 2013. Is there any way that this can be a QCD?
Answer: No. The requirement of Sec. 208(b)(2)(B) is that the distribution from the IRA to the taxpayer must be made after November 30, 2012 but before January 31, 2013. Cash gifts made from distributions taken prior to December 1, 2012 are not eligible to be treated as a QCD.
4. Distribution Exceeds RMD
Question: Susan must take $16,000 as her RMD in 2012. On December 18, 2012, she received a distribution from her IRA of $20,000. Can she give the full $20,000 as a QCD?
Answer: Yes. Sec. 208(b)(2)(B) states that "any portion of a distribution" will qualify. Therefore, any amount up to the $100,000 QCD limit may be transferred to charity in January of 2013 and it may be treated as a 2012 QCD.
5. Cash Gift Before Distribution
Question: James makes a cash gift to Favorite Charity of $10,000 on December 3, 2012. On December 15, 2012, he receives his $10,000 RMD from his IRA. Can this be a QCD?
Answer: No. Sec. 208(b)(2)(B)(1) contemplates that transfers from the donor to charity are to be "transferred in cash after the distribution" to qualify as a QCD. The key here is that the donor can make the cash gift but only “after” taking their RMD.
6. Age 70½ Gift
Question: Susan was born June 30, 1942. She turned 70½ on December 30, 2012. On December 15, 2012, Susan received an IRA distribution of $20,000. Can she make a gift to charity in January of 2013 and have a QCD?
Answer: Yes. Sec. 208(b)(2)(A) states that a taxpayer may elect to have "any" QCD made in January 2013 treated as if it was made on December 31, 2012. Even though Susan received the distribution on December 15, because the cash gift is in January of 2013, she could elect to have it treated as a December 31, 2012 QCD. Because she was age 70 ½ on December 30, this should qualify.
7. Multiple QCDs in 2012
Question: Harry would like to make multiple QCDs in 2012. Because he thought that the IRA Charitable Rollover would be enacted for 2012, he had his custodian make a $5,000 QCD in October of 2012. He also received an RMD in the amount of $8,000 on December 5, 2012. Harry would like to give the $8,000 RMD on January 15, 2013 and also add a $10,000 QCD gift from his IRA to Favorite Charity on January 20, 2013. Will all three gifts be 2012 QCDs?
Answer: Yes. First, ATRA Sec. 208(a) changes the sunset date for IRC Sec. 408(d)(8) to December 31, 2013. This enables 2012 QCDs to be qualified. Second, IRC Sec. 408(d)(8)(A) states that “qualified charitable distributions” up to $100,000 in one year are permitted. The plural on “distributions” permits multiple QCDs in one year within the $100,000 limit. Therefore, ATRA Sec. 208(b)(2)(B) states that “any portion of a distribution from an individual retirement account” may be transferred to charity before February 1, 2013. The $8,000 RMD gift to Favorite Charity is a 2012 QCD. Third, Sec. 208(b)(2)(A) states that “any” QCD in January will be deemed to have an effective date of December 31, 2012. The $10,000 IRA charitable rollover on January 20, 2013 is therefore a QCD with a December 31, 2012 effective date. All three QCDs are permitted.
Copyright © 2013 By A. Charles Schultz, J.D.
Question: Susan was born June 30, 1942. She turned 70½ on December 30, 2012. On December 15, 2012, Susan received an IRA distribution of $20,000. Can she make a gift to charity in January of 2013 and have a QCD?
Answer: Yes. Sec. 208(b)(2)(A) states that a taxpayer may elect to have "any" QCD made in January 2013 treated as if it was made on December 31, 2012. Even though Susan received the distribution on December 15, because the cash gift is in January of 2013, she could elect to have it treated as a December 31, 2012 QCD. Because she was age 70 ½ on December 30, this should qualify.
7. Multiple QCDs in 2012
Question: Harry would like to make multiple QCDs in 2012. Because he thought that the IRA Charitable Rollover would be enacted for 2012, he had his custodian make a $5,000 QCD in October of 2012. He also received an RMD in the amount of $8,000 on December 5, 2012. Harry would like to give the $8,000 RMD on January 15, 2013 and also add a $10,000 QCD gift from his IRA to Favorite Charity on January 20, 2013. Will all three gifts be 2012 QCDs?
Answer: Yes. First, ATRA Sec. 208(a) changes the sunset date for IRC Sec. 408(d)(8) to December 31, 2013. This enables 2012 QCDs to be qualified. Second, IRC Sec. 408(d)(8)(A) states that “qualified charitable distributions” up to $100,000 in one year are permitted. The plural on “distributions” permits multiple QCDs in one year within the $100,000 limit. Therefore, ATRA Sec. 208(b)(2)(B) states that “any portion of a distribution from an individual retirement account” may be transferred to charity before February 1, 2013. The $8,000 RMD gift to Favorite Charity is a 2012 QCD. Third, Sec. 208(b)(2)(A) states that “any” QCD in January will be deemed to have an effective date of December 31, 2012. The $10,000 IRA charitable rollover on January 20, 2013 is therefore a QCD with a December 31, 2012 effective date. All three QCDs are permitted.
Copyright © 2013 By A. Charles Schultz, J.D.