Recent Developments

On October 3, 2008 another tax bill was enacted, called "Tax Extenders and Alternative Minimum Tax Relief Act of 2008" (Act). The Act extends a the following charitable gift provisions through 2009: ◙ IRA charitable rollover. If you're aged 70 1/2 + you can donate up to $100,000 of your regular or Roth IRA to a public charity without having to treat the distribution to the charity as taxable income.  For seniors who don't itemize deductions, and hence would not realize a contribution deduction, this is a tremendous benefit. ◙ Enhanced business charitable deductions. Businesses can claim an enhanced deduction for contributions of food inventory during 2008.  C corporations can claim an enhanced deduction for contributions of book inventories to schools, public libraries, and literacy programs. Another provision provides an enhanced deduction for businesses contributing computer equipment and software to certain schools. ◙ Basis adjustment to stock of S corporations donating property. When an S corporation donates property to a charity the amount of a shareholder's income tax basis reduction in the S corporation stock will be equal to the shareholder's pro rata share of the adjusted basis of the contributed property. If this special rule was not provided the adjustment to the shareholder's tax basis would be for the pro rata share of the fair market value of the contribution. The Act added several new charitable giving provisions: ◙ Limitations on charitable contributions. The general limitation on charitable contribution deductions is that they cannot exceed 10% of a corporation's taxable income, or 50% of an individual's adjusted gross income in any tax year. These limits are suspended for cash donations to Midwestern disaster relief efforts made during 2008 after the date of the disaster. ◙ Standard auto mileage rates for charitable use. When you use your car in performing charitable work, you can deduct the cost of the mileage by multiplying the number of miles driven by a flat rate of 14 cents. This rate has not be adjusted in more than a decade and substantially understates the cost of operating a car. For work in assisting Midwestern disaster relief efforts, the rate is set at 70% of the current standard business mileage rate, during 2008 after the date of the disaster. Reimbursements for volunteers up to the amount of the standard business mileage rate will be excluded from income in 2008.