The American Taxpayer Relief Act of 2012 (ATRA-2012) (Pub L 112-240, 126 Stat 2313) allows IRA owners to make retroactive direct distributions to charity for 2012. It could be a good deal for you or your clients, but you have to act by January 31, 2013—this week!—to take advantage of it.
Here’s how it works.
Under IRC §408(d)(8), IRA owners over age 70 ½ can exclude from gross income up to $100,000 per year distributed from the IRA directly to charity. The distribution still counts as a minimum required distribution, and the percentage limitations on charitable deductions in IRC §170 do not apply because the distribution is excluded from the owner’s income.
The provision expired on December 31, 2011, but has now been extended to December 31, 2013.
The legislation provides that a distribution made to the owner in December 2012 (but not earlier) will be treated as a direct distribution if the owner now contributes the same amount in cash (up to $100,000) to charity before February 1, 2013. ATRA-2012 §208(b)(2)(B).
And if you forgot to make a minimum required distribution in 2012, you can still make a cash contribution (up to $100,000) to charity this month and the contribution will be treated as a direct distribution made on December 31, 2012. ATRA-2012 §208(b)(2)(A).
But you have to act now.
For a detailed discussion of ATRA-2012, see the February issue of the Estate Planning & California Probate Reporter, a must-have publication for every estate planning practitioner.