Charity and tax questions?

Question

I want to set up an account for charity. I have been thinking of a brokerage account with money in mutual funds, etc, from which i contribute yearly to a charity of choice. What are the tax implications of such accout? Will my contributions be tax exempt? What about the dividents?

Answer 1

you'd probably do better for form a charitable organization. then people would want to give to you directly, since it's tax deductible. you manage and use the money for charity as you wish.

however, if you want to start a financial services company and give money away every year to your favorite charity, that's a for-profit who just happens to be nice and civic minded.

Answer 2

I think I get what you're asking. Basically, you open an account that you're going to make charitable contributions from, and you contribute to it during the year. Then you use that account to make charitable contributions.

If this is the case, then here's your answer. You'd want to set up a charitable trust. I'd imagine your CPA can help you do this, or a lawyer I'm sure will be able to assist you. I believe you'd have to get a ruling from the IRS stating that contributions to the trust are deductible, and the trust has to be set up to only be able to distribute to certain charities. Your contributions to the trust would then be tax deductible as any others normally would be.

All activity inside the trust would then also be shielded from taxes, thus, through smart investing you could donate $1000 to the trust, earn interest and received dividends and appreciation of assets, and make charitable contributions for more then you put in! I believe you'd then receive a Sch. K-1 from the trust saying what your charitable contributions were for the year.

Of course, I wouldn't take my word for it, I'd call your CPA and/or a lawyer who knows about these things.