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GiftLaw Pro Home   >  Chapter 6 - Charitable Deduction Methods  >  6.1 Actuarial Methods  >  6.1.4 Sec. 72 and Charitable Gift Annuities  >  Basic Quiz

Basic Quiz - 6.1.4 Sec. 72 and Charitable Gift Annuities

1. If a donor has some cost basis in the asset used to fund a gift annuity, a portion of the gift annuity payments will be tax-free.
           
2. If an annuitant passes away before his or her life expectancy, the unreturned principal will be "donated" to the issuing charity.
           
3. "Expected-return multiple" means the amount of principal expected to be returned to an annuitant out of the contract.
           
4. A gift annuity is deemed to be a bargain sale.
           
5. The 90CM life expectancy table is used to spread out the capital gain and tax-free amounts of a gift annuity payment.
           
6. A gift annuity payment will always be all ordinary income.
           
7. If a donor transfers $10,000 for a gift annuity and the deduction is $4,000, the value of the donor's interest in the gift annuity income stream is $6,000.
           
8. The expected-return multiple is used both to calculate the life expectancy over which the capital gain and tax-free amounts of an annuity payment will be allocated and to determine the charitable deduction.
           
9. Unrecovered return of principal refers to the amount of tax-free income that the annuitant will not receive if dying prior to his or her projected life expectancy.
           
10. The tax deduction for unrecovered return of principal is a charitable income tax deduction taken on the decedent's estate tax return.