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Giving Opportunity: 2012 IRA Gifts from Donors Over 70½ Years of Age

Are you worried that the mandatory IRA distribution for individuals 70 ½ or older will cost you additional taxes or, even worse, promote you into a higher tax bracket?

In several of the years prior to 2012, the IRS has allowed individuals of 70 ½ + years to direct their Individual Retirement Account (IRA) custodian to distribute an amount of up to $100,000 to a charity of their choice as a direct contribution. The Internal Revenue Code provision that authorized these so-called "IRA rollover gifts" expired on December 31, 2011, and as of the date of this message, has not been renewed for calendar year 2012. But there is hope for people who do good planning …

This month, you may be thinking about the minimum distribution amount that you will need to withdraw from your IRA before the end of 2012 to avoid penalty taxes. If you find that you don't need all or any of the minimum withdrawal amount for 2012, you may want to discuss the following idea with your tax adviser.

It has been suggested that individuals age 70½ and older consider directing their IRA custodian to distribute a specific dollar amount directly to a charity, such as The University of Texas at San Antonio, before the end of 2012. We can tell you how to do that.

Then, if at the last minute the Congress of the United States approves the IRA rollover gift extension for calendar year 2012, the amount distributed directly to UTSA could qualify for IRA rollover gifts treatment so long as all the requirements of such gifts were met. This approval is definitely a possibility.

But, you may want to also discuss the ramifications with your adviser if, instead, Congress does not authorize IRA rollover gifts for 2012. It is our understanding that you would then have to report the amount distributed to UTSA as income on your 2012 income tax returns, but you could also claim an itemized income tax charitable deduction (subject to certain limits based on the adjusted gross income [AGI] amount reflected on your 2012 federal tax return). You may or may not be able to claim a charitable deduction on your state income tax return.

If Congress does not authorize IRA rollover gifts for 2012, the goal might be to direct your IRA custodian to distribute to UTSA not more than the amount that you could claim as an itemized income tax charitable deduction on your 2012 federal return, so that the additional reportable income is fully offset by the deduction, resulting in $0 taxable income on your federal return.

The Gift Planning Office at UTSA would be happy to talk with you or your adviser about these possibilities. Contact Carolyn Lowery at 210-458-4154 or

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