Planning Potpourri


Contributions Don't Have to be Reduced if You Receive Insubstantial Gifts:

T-shirts, sweatshirts with charity logos are de rigueur at walk-a-thons, bike-a-thons and other charitable events. While these might motivate donors, do these ubiquitous small gift items impact contribution deductions? Yup. The general rule is that you have to reduce the amount of your contribution deduction by the fair value of any gift item received from the charity. However, a couple of exceptions are permitted to reduce the reporting burden on charities and taxpayers alike. The gift item (premium) can be ignored for tax purposes if your donation is $50 or more (adjusted annually for inflation -- $89.00 in 2007) and the value of the gift item is not more than 2% of your donation. You donate $100 and receive a key chain worth $1.90, no problem. Alternatively, if you donate $25 or more (adjusted annually for inflation -- $44.50 in 2007) and the gift item qualifies as a low cost article, it can be ignored. This is an item bearing the organizations name or logo which has a wholesale value of $5.00 or less (adjusted for inflation -- $8.90 in 2007). You donate $100 and receive a Jacket worth $25.00 at retail, but which the charity purchased for $8.50, it can be ignored. Rev. Proc. 90-12, 92-49, and 2006-53.


Waiver of a Spousal Right of Election:

State law gives a spouse the right to claim a minimum portion of their deceased spouse's estate. For many couples, a standard part of the prenuptial agreement dance is to agree to forgo (waive) this right. But to waive your claim against your spouse's estate you have to know what you are waiving. That requires disclosure of financial data. New Jersey, for example, requires "full and fair disclosure" NJSA Sec. 37:2-38. Ed told his fiancée Stacey he was worth about $850,000 and Stacey's lawyer asked for more financial info. Ed told her that's all the info she's getting and sign the agreement or the marriage is off. Whoa, don't think Host Chris Harrison, would have liked this guy on The Bachelor! On later insurance applications Ed indicated he was worth $6M. The law says a pre-nup is not enforceable without full and fair disclosure. An argument that Stacey should be equitably estopped from claiming this was set aside. The lesson is simple, if you want a waiver and prenup to hold, disclose. In Re Estate of Shinn, App. Div. A-3819-O5T5, 6/20/07.

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