Federal Income Taxation of Charities Term Paper by Nicky

Federal Income Taxation of Charities
An examination of the Internal Revenue Service's laws regarding tax exemptions for charities and charitable organizations.
# 149656 | 3,862 words | 15 sources | APA | 2011 | US
Published on Dec 27, 2011 in Economics (Taxation) , Law (General)

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The paper looks at how the Internal Revenue Code has defined charitable organizations and the trusts that are eligible to receive donations with tax exceptions. The paper looks at large scale sham cases that used the provisions of charity to evade tax and the resulting legislation that has removed the special status of charitable organizations and has brought them under their scrutiny. The paper looks at when a donor gets benefits of tax deductions and when a taxpayer will not be able to avail the provisions of the charity provisions where there has been an 'ear marked' donation.

Definition & Classification of Charity
Analysis of Taxation and its Incidence on Beneficiaries for Charities
Benefits and Deductions
Negation of Tax Benefits, and Incidence of Tax
Sham Beneficiaries

From the Paper:

"The definition of a trust is said to be: A separate taxable entity "for federal income tax purposes." The trusts are legally of many types, but generally are created out of the will or arrangement by a donor or creator of the trust and an appointed trustee takes the charge and responsible of the trust and all assets and property of the trust which is a new legal entity. The beneficiary or beneficiaries are the person or persons who derive benefit from the trust or are entitled to receive income or benefits from the values held by the trust. Thus the beneficiaries could be a class of persons as described by the charter of the trust eg: Visually challenged persons. Or it could even be the members of the trust including the founder, in which case too the trust being a separate entity can hold the amounts in trust for them. Thus the beneficiaries could be any person. There are business and investment trusts that are created for the purpose of business or are based on profit making and this is usually done using the capital provided by the donors or creators of the trust. This type of trust closely resembles a partnership and can be taxed as a business entity in the same way as a company. Thus there is no tax exemption as in the case of charitable trusts. (CCH Incorporated, Commerce Clearing House, CCH Tax Law, 2007) A liquidating trust likewise is formed to liquidate assets and it is taxed as a trust."

Sample of Sources Used:

  • Abbin, Byrle M. (2008) "Income Taxation of Fiduciaries and Beneficiaries, 2008"CCH.
  • Braunstein, Samuel L; Burger, Carol F. (2007) "The IRS Gets Less Charitable- New tax rules for charitable deductions create hurdles to taxpayer philanthropy." ABA Journal, Retrieved 10 June, 2009 from http://abajournal.com/magazine/the_irs_gets_less_charitable/
  • Buckles, Johnny Rex. (2002) "The Case of the Taxpaying Good Samaritan: Deducting Earmarked Transfers to Charity under Federal Income Tax Law, Theory, and Policy"Fordham Law Review, vol. 70, p. 1243.
  • CCH Incorporated, Commerce Clearing House, CCH Tax Law. (2007) "U.S. Master Tax Guide 2008" CCH.
  • Eisenstein, Ilana H. (2003) "Keeping Charity in Charitable Trust Law: The Barnes Foundation and the Case for Consideration of Public Interest in Administration of Charitable Trusts." University of Pennsylvania Law Review, vol. 151, pp: 17-21.

Cite this Term Paper:

APA Format

Federal Income Taxation of Charities (2011, December 27) Retrieved May 25, 2022, from https://www.academon.com/term-paper/federal-income-taxation-of-charities-149656/

MLA Format

"Federal Income Taxation of Charities" 27 December 2011. Web. 25 May. 2022. <https://www.academon.com/term-paper/federal-income-taxation-of-charities-149656/>