Partial Interest Donations

18 Questions | Total Attempts: 107

SettingsSettingsSettings
Please wait...
Partial Interest Donations

This quiz is part of the introductory curriculum for the graduate course Personal Financial Planning 5325 "Introduction to Charitable Planning" from Texas Tech University. For free downloads of the audio lectures and PowerPoint slides for this course, or to learn about the online Graduate Certificate in Charitable Financial Planning at Texas Tech University, go to www. EncourageGenerosity. Com


Related Topics
Questions and Answers
  • 1. 
      Which of the following is an example of an immediately deductible charitable gift?
    • A. 

      I own a building and allow a charity to use it rent free

    • B. 

      I inherit a time share in a vacation rental property and I give all of it (all of my interests in the property) to a charity

    • C. 

      I own an automobile and sign a contract promising to give it to the charity in ten years

    • D. 

      I give land to a charity, but retain the mineral rights in the land

    • E. 

      I give the right to use a farm for 20 years to a charity, and retain the reversionary interest that directs that it will become owned by me again at the end of the 20 years

  • 2. 
      Which of the following would constitute a deductible gift of an undivided interest in an office building that I own?
    • A. 

      I give a charity a 10% ownership interest as a tenant in common including the right to 10% share of all net operating income

    • B. 

      I give a charity the right to use the top floor of the office building without charge

    • C. 

      I give a remainder interest in the property giving the charity a right to own the property after my death

    • D. 

      I give the charity the right to 10% of all profits from the building for a ten year period beginning in 12 months

    • E. 

      I give the charity the right to lease out any open office space to paying clients and receive half of all rent collected from those clients

  • 3. 
      What is the general rule for partial interest gifts where the donor retains some interest in the gifted property?
    • A. 

      They are deductible, but only up to 20% of adjusted gross income

    • B. 

      They are not deductible unless accompanied by a qualified appraisal

    • C. 

      They are not deductible unless the gift fits into one of the specific exceptions

    • D. 

      They are not deductible unless given to a qualified 501(c)3 organization

    • E. 

      They are generally deductible

  • 4. 
    What is the primary motivation behind the rule against deducting partial interest gifts?
    • A. 

      Partial interest gifts are unnecessarily complex, and this complexity suggests an attempt to defraud the IRS

    • B. 

      Charities must receive a minimum of 5% per year in benefits for the gift to qualify

    • C. 

      If a donor keeps part of the interests in a piece of property, it is often possible to manipulate the circumstances such that the donor receives a much higher share of the benefit than is reflected by the initial deduction

    • D. 

      The value of future interests gifts is not ascertainable until such time as the all intervening rights are removed and the charity is the sole owner

    • E. 

      Gifts of less than the entire ownership interest in a piece of property are inherently difficult to correctly value

  • 5. 
      An example of a non-deductible divided share gift would be
    • A. 

      Giving a wheel from a car that I own

    • B. 

      Giving 10 acres from a 1,000 acre farm that I own

    • C. 

      Giving the right to use my entire 1,000 acre farm for 10 years for free

    • D. 

      Giving a 10% ownership right as tenants-in-common in my 1,000 acre farm

    • E. 

      Giving one painting out of a collection of 200 that I own

  • 6. 
      Which of the following qualifies as a deductible gift that gives away only part of the donor’s ownership interests? I. A gift of farmland where the donor retains the right to later place a limited number of billboard signs or wind turbines on the property II. An undivided 15% ownership in farmland given by a donor where the donor retains all underlying mineral rights to the farmland III. An undivided 15% ownership right in a condominium owned by the donor where the donor has never resided, but has used exclusively as rental property IV. A gift of the use of a time share interest for ten years V.  A gift of the reproduction rights to a work of art where the donor never owned any rights in the art other than the reproduction rights
    • A. 

      II

    • B. 

      III

    • C. 

      II & III

    • D. 

      III & IV

    • E. 

      None of the above

  • 7. 
      Which of the following are not deductible because of the retention of an ownership right by the donor? I.    A gift of farmland where the donor retains the right to later place a limited number of billboard signs or wind turbines on the propertyII.   An undivided 15% ownership in farmland given by a donor where the donor retains all underlying mineral rights to the farmlandIII.  An undivided 15% ownership right in a condominium owned by the donor where the donor has never resided, but has used exclusively as rental property IV.   A gift of the use of a time share interest for ten years V.    A gift of the reproduction rights to a work of art where the donor never owned any rights in the art other than the reproduction rights
    • A. 

      I, II, & IV

    • B. 

      I, II, III & IV

    • C. 

      I, II, & V

    • D. 

      II, III & IV

    • E. 

      I, I, IV & V

  • 8. 
      Which of the following describes a deductible gift where the donor gave up all of his or her rights in the property being donated? I.   A gift of farmland where the donor retains the right to later place a limited number of billboard signs or wind turbines on the property II.  An undivided 15% ownership in farmland given by a donor where the donor retains all underlying mineral rights to the farmland III. A remainder interest which will give the charity ownership at the donor's death of a condominium owned by the donor where the donor has never resided, but has used exclusively as rental property IV.  A gift of the use of a time share interest for ten years V.   A gift of the reproduction rights to a work of art where the donor never owned any rights in the art other than the reproduction rights
    • A. 

      III & V

    • B. 

      I only

    • C. 

      I, IV, & V

    • D. 

      V only

    • E. 

      III and V

  • 9. 
      How many of the following charitable gifts could generate an income tax deductible? I.   Donor gives a West Texas cotton farm, but keeps all mineral rights II.  Donor gives a valuable painting to an art museum, but keeps all digital and reproduction rights III. Donor gives all ownership rights in a painting that he painted himself which, although it has great sentimental value, does not have any fair market value IV.  Donor gives to charity the right to receive his automobile after his death V.   Donor gives a local church the right to farm his highly productive land for the next 10 years without any rent charge
    • A. 

      0

    • B. 

      1

    • C. 

      2

    • D. 

      3

    • E. 

      4

  • 10. 
      How many of the following charitable gifts could generate an income tax deductible? I.   Donor gives a 5% interest as tenants in common in a West Texas cotton farm without the mineral rights because the donor never owned the mineral rights II.  Donor gives a 10% interest as tenants in common in an Iowa corn farm where a billboard company (unrelated to the donor) owns the rights to place billboards on the farmland where the interstate highway adjoins the farmland. III. A donor pays for a ten year lease to the top floor of an office building in downtown Seattle. (The lease represents her only rights in the building.)  She then gives the right to use the office building during the entire period of the ten year lease to a local charity at no charge to the charity. IV.  A donor has a life estate giving her the right to use a vacation property for the remainder of her life.  The donor gives an 11/12 interest in the life estate as tenants in common to the charity.  The donor retains a 1/12 interest including the right to use the property for one month out of each year during the remainder of her life. V.   Donor owns a cotton farm in West Texas including all mineral rights.  Donor simultaneously gives half of the mineral rights to charity A, the other half of the mineral rights to charity B, the right to use the property for the next 5 years to charity C, the right to use the property for years 6-10 to charity D, and all remaining interests following the 10 year period one-half to charity E and one-half to charity F.
    • A. 

      1

    • B. 

      2

    • C. 

      3

    • D. 

      4

    • E. 

      5

  • 11. 
      A donor gives a 1/12 undivided interest in all his rights in a painting to a public charity art museum (including the right to display the painting for one month per year).  The donor gives an additional 1/12 undivided interest each year for 10 more years to the same art museum.  The donor retains the final 1/12 interest to be kept by his family so that the art work can be displayed for one month out of the year in his family home.  The painting is valued at $120,000 at the time of the initial 1/12 interest gift.  Each year it increases by an additional $12,000 by the time of the transfer of each subsequent 1/12 interest gift.  What is the total value of the deduction for this gift?
    • A. 

      $10,000 (year 1)+ $11,000 (year 2)+ $12,000 (year 3)+ $13,000 (year 4)+ $14,000 (year 5)+ $15,000 (year 5)+ $16,000 (year 6)+ $17,000 (year 7)+ $18,000 (year 8)+ $19,000 (year 9)+ $20,000 (year 10)+ $21,000 (year 11).

    • B. 

      $10,000 x 11

    • C. 

      $22,000 x 11

    • D. 

      $120,000

    • E. 

      $0 (or less depending upon interest and penalties)

  • 12. 
    A donor gives a 1/10 undivided interest in all his rights in a painting to a public charity art museum (including the right to display the painting for 1/10 of each year).  The donor gives an additional 1/10 undivided interest each year for 9 more years to the same art museum, completing a gift of the entire work of art in 10 years.  The painting is valued at $100,000 at the time of the initial 1/10 interest gift.  Each year it increases by an additional $10,000 by the time of the transfer of each subsequent 1/10 interest gift.  What is the total value of the deduction for this gift?
    • A. 

      $10,000 (year 1)+ $11,000 (year 2)+ $12,000 (year 3)+ $13,000 (year 4)+ $14,000 (year 5)+ $15,000 (year 5)+ $16,000 (year 6)+ $17,000 (year 7)+ $18,000 (year 8)+ $19,000 (year 9)+ $20,000 (year 10)

    • B. 

      $10,000 x 10

    • C. 

      $20,000 x 10

    • D. 

      $150,000

    • E. 

      $0 (or less depending upon interest and penalties)

  • 13. 
    A donor gives a 1/12 undivided interest in all his rights in a vacation home to a local charity (including the right to use or rent out the property for one month per year).  The donor gives an additional 1/12 undivided interest each year for 10 more years to the same charity.  The donor retains the final 1/12 interest to be kept by his family so that they can use the vacation home for one month out of each year.  The property is valued at $120,000 at the time of the initial 1/12 interest gift.  Each year it increases by an additional $12,000 by the time of the transfer of each subsequent 1/12 interest gift.  What is the total value of the deduction for this gift?
    • A. 

      $10,000 (year 1)+ $11,000 (year 2)+ $12,000 (year 3)+ $13,000 (year 4)+ $14,000 (year 5)+ $15,000 (year 5)+ $16,000 (year 6)+ $17,000 (year 7)+ $18,000 (year 8)+ $19,000 (year 9)+ $20,000 (year 10)+ $21,000 (year 11)

    • B. 

      $10,000 x 11

    • C. 

      $22,000 x 11

    • D. 

      $120,000

    • E. 

      $0 (or less depending upon interest and penalties)

  • 14. 
     Which of the following gifts will NOT qualify for a current income tax deduction?
    • A. 

      Artie signed and delivered a deed conveying his beach house residence to the American Cancer Society.

    • B. 

      Benjamin executed a new will which gives 200 acres of his farm to the Boy Scouts of America for use as a campground.

    • C. 

      Carrie irrevocably transfers an undivided 1/3 interest as tenants in common in a rental house to the American Red Cross.

    • D. 

      All of these gifts qualify for a current income tax deduction

    • E. 

      None of these gifts qualify for a current income tax deduction

  • 15. 
    Alvin and Amy own a ski chalet outside of Taos, New Mexico.  When the chalet is not being used by Alvin and Amy or their close friends and family, they rent the property through an agent earning $1,000 per week.  This year, Alvin and Amy signed a written authorization for their minister to use the chalet for one month each year for three years to host a series of marriage retreats where young married couples would get away and recommit to each other and to God.  The authorization letter was signed by Alvin and Amy and placed into the donation plate that was passed around the congregation during a Sunday service.  Which of the following amounts is closest to the deduction that will be allowed this year?
    • A. 

      $12,000

    • B. 

      An amount between $4,001 and $11,999

    • C. 

      $4,000

    • D. 

      An amount between $0 and $3,999

    • E. 

      $0

  • 16. 
    Which is NOT an exception to rule that gifts of partial interests generate no income tax deduction?  
    • A. 

      A qualified conservation easement

    • B. 

      A “qualified percentage” of the donor’s partial interest in property

    • C. 

      An “undivided portion” of the donor’s entire interest in property

    • D. 

      An interest transferred in the form of a charitable lead trust, charitable annuity trust, charitable remainder unit trust, or pooled income fund

    • E. 

      An irrevocable remainder interest in a personal residence or farm

  • 17. 
    Which one of the following qualifies for an income tax deduction:
    • A. 

      Owner of a building allows a charity to use it rent free for 10 years

    • B. 

      A painter giving his highly valued painting to charity but keeps the copyright interests

    • C. 

      A donor puts his office building in an IRREVOCABLE trust that will transfer the land to the charity at his death.

    • D. 

      A local art gallery receives a 1/12 interest in a painting owned by a donor. The donor never makes any other gifts of the remaining interest in the painting to any charity.

    • E. 

      A person donates an office building to his church with the provision that all proceeds from rent for the first 10 years must be given to the Red Cross.

  • 18. 
    Thanks for taking the quiz!  The rest of the free online curriculum, including slides and audio lectures, is at www.EncourageGenerosity.com.  Our ability to create and post new curriculum depends on being able to prove that it is actually being used by professionals in nonprofits or financial advising.  It would help us tremendously if you would write your name and the name of your organization below, so that we will have evidence that this product is being used.  Thanks!