Is It Any Wonder?
Check out how cynical our society is becoming. On MSN's tax advice page today we have this gem of an idea.
A last trick -- and it's legal!Here’s one trick I’ll bet you don’t know. I call it the Schnepper-Malagoli Charitable Tax Grab. Rent your home to any charitable organization during the year -- up to 14 days total -- and pay zero tax on the rental income. (Internal Revenue Code Section 280A (g), for those of you who feel compelled to look it up.)
Say your church, synagogue or any recognized charity rents your home for a board meeting. They pay you $500. That money is completely tax-free. Then, without any compulsion or prearrangement, you contribute $600 to this same charity. If you’re only in the 25% bracket, you save $150 in tax. The result: With the $500 tax-free rental income, you’ve got a total of $650 more in your pocket, less the $600 contribution, which gives you a grand total of $50 and your favorite charity $100.
One meeting per month (12 is less than 14 days) and you’ve “made” $600, while the charity is up $1,200! Was it intended when Congress drafted the tax code? Clearly, no. Is it completely within the clear wording of the code? Absolutely, yes! Just because it’s a loophole doesn’t mean you can’t legally do it. And, there’s nothing wrong with doing well while you’re doing good.
The key here is the phrase "without any compulsion or prearrangement." The whole deal of cycling money through your charity to reduce your tax bill rests on a tacit understanding between you and your church or synagogue or whatever. But unless you belong to some kind of Congregation of the ESP, I don't quite know how you are going to arrange for a rental fee of $500 a day for use of your home and a kick back of $600. Are taxes that onerous? They pay for relief efforts in the Gulf. They pay for our troops over seas. They build our roads. They maintain our public health. They fund important scientific research. The list goes on. But here we have someone counseling us to enter into fraud with a charitable institution. It's only fraud of course if the agreements are explicit. But how else would you arrange this? And anyway, who would belong to a church with this kind of cynicism?
A last trick -- and it's legal!Here’s one trick I’ll bet you don’t know. I call it the Schnepper-Malagoli Charitable Tax Grab. Rent your home to any charitable organization during the year -- up to 14 days total -- and pay zero tax on the rental income. (Internal Revenue Code Section 280A (g), for those of you who feel compelled to look it up.)
Say your church, synagogue or any recognized charity rents your home for a board meeting. They pay you $500. That money is completely tax-free. Then, without any compulsion or prearrangement, you contribute $600 to this same charity. If you’re only in the 25% bracket, you save $150 in tax. The result: With the $500 tax-free rental income, you’ve got a total of $650 more in your pocket, less the $600 contribution, which gives you a grand total of $50 and your favorite charity $100.
One meeting per month (12 is less than 14 days) and you’ve “made” $600, while the charity is up $1,200! Was it intended when Congress drafted the tax code? Clearly, no. Is it completely within the clear wording of the code? Absolutely, yes! Just because it’s a loophole doesn’t mean you can’t legally do it. And, there’s nothing wrong with doing well while you’re doing good.
The key here is the phrase "without any compulsion or prearrangement." The whole deal of cycling money through your charity to reduce your tax bill rests on a tacit understanding between you and your church or synagogue or whatever. But unless you belong to some kind of Congregation of the ESP, I don't quite know how you are going to arrange for a rental fee of $500 a day for use of your home and a kick back of $600. Are taxes that onerous? They pay for relief efforts in the Gulf. They pay for our troops over seas. They build our roads. They maintain our public health. They fund important scientific research. The list goes on. But here we have someone counseling us to enter into fraud with a charitable institution. It's only fraud of course if the agreements are explicit. But how else would you arrange this? And anyway, who would belong to a church with this kind of cynicism?
posted by EPE | Link:12/07/2005 10:20:00 AM
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