Taxation

IRS Election Statement

The election statement provides all the information that the IRS requires of a donor who elects to compute her charitable deduction using an IRS discount rate that is for either of the two months prior to the month of the gift.  The donor must attach the election statement to Schedule A of her federal income tax return for the year of the gift.

Exclusion Ratio

The Expected return and Investment in contract are used to calculate the portion of each annuity payment that will be excluded from income as a tax-free return of principal. This exclusion ratio is calculated by dividing the Investment in contract (the fair market value of the gift less the charitable deduction) by the Expected return (the total amount in annuity payments expected to be returned to the beneficiaries).(1) The exclusion ratio is rounded at three decimal places (one-tenth of one percent).

Sponge Tax

Sponge tax is the term used to describe a state death tax that maximizes the state's share of an estate's transfer taxes without increasing the estate's total transfer tax burden.

Schedule SE

Schedule SE is the portion of the federal income tax return where the taxpayer computes self-employment tax. The taxpayer attaches Schedule SE to his or her Form 1040 when filing the return.

Schedule R

Schedule R is the portion of the federal income tax return where the taxpayer computes the tax credit for the elderly or disabled. The taxpayer attaches Schedule R to his or her Form 1040 when filing the return.