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Alan

Charitable Deduction

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My great uncle is donating his coin collection worth over a million dollars to charity. He does not want to sell it now he wanted to wait till he dies so he does not have to pay capital gains tax. He wants to know if he gifts the collection to my dad (who is in a high tax bracket) can my dad then turn around and donate it to a charity and take the charitable deduction? My uncle has no income so he has no use for the deduction but my dad does.

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No. Please don't. Not necessary to make a duplicate post as we all read all the forums and duplicate posts are annoying.

 

Your great uncle will have to file a gift tax return but there will likely be no tax as the gift tax exclusion is over $10,000,000 and recipients don't pay taxes on gifts unless they sell them. Then the basis for the gain is what the donor paid for the items.

 

Once your father owns it he can donate it to charity. He will need the coin collection appraised. The tax deduction may be limited by a variety of factors as explained on the following IRS page:

 

https://www.irs.gov/charities-non-profits/charitable-organizations/charitable-contribution-deductions

 

There are links to additional publications.

 

Your father may want to consider donating only a part of the collection each year to get the best results.

 

 

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I disagree that your dad is 'using your uncle's tax deduction.'

Your uncle owns something valuable.  He can keep it, sell it, give it away, donate it to charity, or maybe do something else with it.  it is his to dispose of as he sees fit.

If your uncle donates it to charity, then he may be able to take a charitable deduction on it.

 

In the situation you describe above, if your uncle decides to give the coin collection to your dad, then, unless they've made some other arrangements between them, your dad is completely free to do with the coin collection whatever he wants to do with it (keep it, sell it, give it away, donate it to charity, etc.) -- all the same rights of ownership as your uncle had.

 

The net effect of the arrangement may be that your uncle is giving up the opportunity to claim a tax deduction and your dad is gaining the opportunity to claim a tax deduction, both relating to the a possible charitable donation of the same asset, but that doesn't mean that your dad is improperly claiming a tax deduction to which he is not entitled.

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2 hours ago, Alan said:

My great uncle is donating his coin collection worth over a million dollars to charity. He does not want to sell it now he wanted to wait till he dies so he does not have to pay capital gains tax. He wants to know if he gifts the collection to my dad (who is in a high tax bracket) can my dad then turn around and donate it to a charity and take the charitable deduction? My uncle has no income so he has no use for the deduction but my dad does.

 

That will work so long as there is no agreement or understanding between them that obligates your father to make the charitable contribution.

 

Assuming no such arrangement, your great uncle would, as others have noted, have to file a federal gift tax return and that should not be taken lightly when the gift involved is $1 million. While under current law your great uncle would have no federal gift tax to pay unless he has already given away at least $10 million of assets during his lifetime, there is always the possibility that the law could change reducing the unified credit (which is what controls how much one can give away tax free). Indeed, Bernie Sanders has already floated the idea of significantly reducing the unified credit along with other proposed changes to the federal gift and estate tax.

 

Note too that there are limitations on the charitable deduction. See IRS Publication 526.

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So there would be no legal obligation for my dad to do it but he would do it because thats what my uncle would want. So there is an "obligation" but no documentation or anything binding him to do it-just his word.

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1 hour ago, adjusterjack said:

He would be donating voluntarily to please his uncle. That's not an obligation. He cannot be compelled to donate.

 

He could just as easily accept the gift, sell the coins and pocket the money.

 

It doesn't necessarily have to be an enforceable agreement. If the gift is made with the understanding that the father will do as the great uncle wants, that can be a problem.

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