Question

Pete has a offer to sell his business. In the planning process, Tony recommends that Pete transfer 10% of the company into a Charitable Remainder Trust prior to the sale?

‐ why might this recommendation be made?

‐ What are the gift tax implications, assuming that Pete is the income beneficiary?

‐ What are the gift tax implications, assuming that Pete's children are the income beneficiaries?

‐ What are the income tax implications?

Answer 1

Here is my Answer for the above question

1. Why might this recommendation be made?

There is a tax benefits of giving,A gift to a qualified charitable organization may entitle you to a charitable contribution deduction against your income tax if you itemize deductions.

2.What are the gift tax implications, if pete is the Income beneficiary.

IF an Individual giving gift to Trust is Exception from gift tax

3. What are the gift tax implications, if pete sons are income beneficiaries

then pete son s have no gift tax

4. What are the income tax implications

Usually, money to charities is given from the post-tax income. Charitable contributions do not attract any tax. On the contrary, you get tax relief if you donate to institutions approved under Section 80G of the Income Tax Act, 1961. The rate of deduction is either 50% or 100% depending on the fund you choose. There is no restriction on the amount of charity you give, but as far as the Income Tax Act is concerned, donations up to only 10% of your gross total income qualify for deduction. Considering this, if you contribute to institutions that provide a 50% deduction from the gross total income, the balance 50% will be taxed in your hands at the applicable rate.