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Georgia Smith is a retired teacher, who is 71 years old. Her
husband, Bob, passed away two years ago. She is preparing
to move into a retirement community. She would like to use
her home to set up a Gift Annuity. She is in the 25% tax bracket.
Bob and Georgia paid $75,000 for their home. She just had
it appraised at $250,000.
In the case of appreciated property such as Georgia's home,
Radio Kansas will normally give a receipt for 20% of the appraised
value to the donor, and then create the Gift Annuity for the
remaining 80%. This allows for some flexibility between the
appraised value and the actual price when Radio Kansas sells
the property. It also helps pay for the cost of the sale.
Mrs. Smith will receive an immediate tax deduction for the
$30,000 donation value of the direct portion of the gift,
which could mean a tax savings of $12,500, within IRS allowances
for the year. They will also bypass capital gains on $15,000
of the direct portion of the gift, with a possible savings
of $2,200. Radio Kansas will then execute a $200,000 Gift
Annuity. With the ages and life expectancies of both in mind,
the standard rate determined by the American Council on Gift
Annuities would give them a 6.6% return each year for as long
as one of them lives.
She will be able to partially bypass an additional $140,000
in capital gains resulting in a possible savings of $8,739.
She will also receive a current tax deduction of $83,225 which
may save her $20,806. These amounts are in addition to the
savings from the $50,000 direct gift above.
She will receive an annual payment of $13,200 for the rest
of her life. Of that payment, $2,371 will be tax free for
the first 15 years.
On average, Mrs. Smith would be expected to receive a total
of $215,160, for an effective payout of 8.2%, while Radio
Kansas is expected to retain the full value of the initial
gift of $250,000.
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All of these figures
are estimates, offered here strictly as an example. Radio
Kansas cannot offer tax or legal advice. Please consult a
tax advisor for final figures in your specific situation.
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