Charitable Deduction When a Charitable Gift Annuity is Donated to Charity

Conventional wisdom has been that the gain upon the sale or exchange of an income interest in a charitable gift annuity is taxable as ordinary income. If the donor gifted his income interest to charity, he would only be able to deduct his investment in the contract as a charitable contribution, as amounts attributable to ordinary income are not deductible under Section 170(e) of the Code. We believe the authority for this proposition is debatable. This presentation considers how income interest in a CGA may be an attractive asset for donation to charity under the right circumstances.