Mr. Andrew Johnson who is 70 years old has decided to donate $50,000
to his college as a gift annuity. The reasons Mr. Johnson chose a gift
annuity are as follows:
- The college receives a gift of $50,000
- Mr. Johnson receives a guaranteed lifetime income
- Mr. Johnson receives a immediate tax deduction
- Mr. Johnson's $50,000 gift is no longer part of his estate
When Mr. Johnson makes the gift to the college he will receive a guaranteed
annual income of $3,750 for the balance of his life, this was based on the
rate recommended by the American Council on Gift Annuities. (ACGA)
In the year in which he makes the donation to the college he will receive
a tax deduction in the amount of $19,857. This amount is based on the IRS
discount rate of 7.2% for the month of September 1999. Each month the IRS
sets the discount rate - check with the IRS for the current discount rate.
When Mr. Johnson receives his annual income of $3,750 he pays taxes only on
a portion of this income, $2,491 of the of $3,750 is not taxable over his
A Gift based on Two Lives
Mr. and Mrs. James Allison have chosen to make a gift to Mrs. Allison's college.
However they would like the guaranteed income to be paid to either Mrs. Allison or
Mr. Allison for as long as either are living.
When Mr. Allison (older beneficiary) make the gift to the college Mr. and Mrs. Allison
receive a tax deduction in the amount of $19,857.
The annual income paid to Mr. Allison and Mrs. Allison is $3,350 which will continue to Mrs. Allison
should Mr. Allison predeceases Mrs. Allison. This annual income will continue until
Mrs. Allison's death.
When Mr. and Mrs. Allison receive their annual income of $3,350 Mr. and Mrs.
Allison will pay taxes only on a portion of the income, $1,530 of the $3,350
will not be taxed over their joint life expectancy.
These examples are only estimates based on current life expectancy tables, the current
discount rate issued by the IRS and the recommended annuity rates suggested by the American
Council on Gift Annuities. (ACGA) Check with the Office of Planning Giving at the
college origination of your choice. They can give you accurate projections based on
you individual circumstances.