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Mr. and Mrs. Smith, both age 70, donate $50,000 cash from their joint account
to The Citadel Foundation in return for a gift annuity that will pay them
6.5% of their donation for as long as either or both of them live. They will
receive annual payments of $3,250 for life. Of this amount, $1,560 is not
subject to income taxes during their joint life expectancies. Mrs. Smith's
immediate income tax deduction is $14,712.
Charitable gift annuities may also be structured to defer income until a future date. These so-called deferred payment gift annuities are considered by many to be an excellent retirement planning vehicle; because income is deferred until a later date, the annuity amount is greatly increased. The donor also receives a larger charitable deduction with a deferred gift annuity (as opposed to a current gift annuity).
Mrs. Jones, age 50, makes a gift of $50,000 cash to fund a deferred payment
gift annuity. At age 65, she will begin receiving annual payments of $7,450,
which is an effective 14.9% return. Of the total yearly payout, $1,542.15
will be excluded from taxable income. She is entitled to claim an immediate
income tax charitable deduction of $28,905.