Recent Developments

On October 3, 2008
another tax bill was enacted, called “Tax Extenders and Alternative
Minimum Tax Relief Act of 2008” (Act). The Act extends a the following charitable
gift provisions through 2009:

◙ IRA charitable rollover. If you’re aged 70 1/2 + you can
donate up to $100,000 of your regular or Roth IRA to a public charity without
having to treat the distribution to the charity as taxable income.  For seniors who don’t itemize
deductions, and hence would not realize a contribution deduction, this is a
tremendous benefit.

◙ Enhanced business charitable deductions.
Businesses can claim an enhanced deduction for contributions of food inventory
during 2008.  C corporations can
claim an enhanced deduction for contributions of book inventories to schools,
public libraries, and literacy programs. Another provision provides an enhanced
deduction for businesses contributing computer equipment and software to
certain schools.

◙ Basis adjustment to stock of S corporations
donating property. When an S corporation donates property to a charity the
amount of a shareholder’s income tax basis reduction in the S corporation stock
will be equal to the shareholder’s pro rata share of the adjusted basis of the
contributed property. If this special rule was not provided the adjustment to
the shareholder’s tax basis would be for the pro rata share of the fair market
value of the contribution. The Act added several new charitable giving provisions:

◙ Limitations on charitable contributions. The
general limitation on charitable contribution deductions is that they cannot
exceed 10% of a corporation’s taxable income, or 50% of an individual’s
adjusted gross income in any tax year.
These limits are suspended for cash donations to Midwestern disaster
relief efforts made during 2008 after the date of the disaster.

◙ Standard auto mileage rates for charitable use. When you use
your car in performing charitable work, you can deduct the cost of the mileage by
multiplying the number of miles driven by a flat rate of 14 cents. This rate
has not be adjusted in more than a decade and substantially understates the
cost of operating a car. For work in assisting Midwestern disaster relief
efforts, the rate is set at 70% of the current standard business mileage rate,
during 2008 after the date of the disaster. Reimbursements for volunteers up to
the amount of the standard business mileage rate will be excluded from income
in 2008.