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02-26-2021, 01:57 PM
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#1
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Give me a museum and I'll fill it. (Picasso)
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Join Date: Jun 2006
Location: Boise
Posts: 5,234
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QCD to DAF?
Hi all,
Recently someone suggested a QCD (Qualified Charitable Distribution) to a DAF (Donor Advised Fund) as a part of a financial plan.
Is this legal and acceptable from a tax point of view? Assume of course that the individual is over 72, the total QCD is less than $100K per year, that the DAF is a legitimate/qualified DAF, and that the transfer is made directly from the traditional IRA to the DAF.
If one substitutes "a 501(c)(3) charity" for "DAF" in the above, I understand the answer to be yes.
I have read some articles on the web indicating that DAFs are somehow excluded from qualifying as QCD recipients. The logic of this point of view escapes me, but I know taxes and logic don't always go hand in hand.
I have searched the IRS web site but not found a clear answer to the question.
(I could ask my CPA, but it was my CPA who made the suggestion in the first place. His remark was sort of offhand as something to look into, not something that he knew was acceptable.)
__________________
"At times the world can seem an unfriendly and sinister place, but believe us when we say there is much more good in it than bad. All you have to do is look hard enough, and what might seem to be a series of unfortunate events, may in fact be the first steps of a journey." Violet Baudelaire.
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02-26-2021, 02:12 PM
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#2
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Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Join Date: Mar 2017
Location: City
Posts: 6,394
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Nope. A DAF is not eligible AFIK. I have read this a number of places.
Our workaround for this has been to establish a named fund with a community foundation. ( https://www.cof.org/page/community-foundation-locator) There is a written agreement specifying the purpose of the fund and stating that it is not a DAF.
That said, the foundation typically involves us when it gets a grant request that might suit. I have also sent them ideas from time to time. It is a great relationship. It is a fairly small organization with only four or five staff and they are very flexible.
I'm not sure that this type of a relationship would be feasible with gifts to a larger foundation, but the community foundation model suits us just fine.
__________________
Ignoramus et ignorabimus
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02-26-2021, 02:36 PM
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#3
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Moderator
Join Date: Feb 2010
Location: Flyover country
Posts: 17,996
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Unfortunately, the law is very specific about DAF's not being eligible to receive a QCD.
 Quote:
The charity must be a 501(c)(3) organization, eligible to receive tax-deductible contributions.
Some charities do not qualify for QCDs:- Private foundations
- Supporting organizations: i.e., charities carrying out exempt purposes by supporting other exempt organizations, usually other public charities
- Donor-advised funds, which public charities manage on behalf of organizations, families, or individuals
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I thought growing old would take longer.
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02-26-2021, 02:47 PM
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#4
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Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Join Date: Jun 2006
Location: Boise
Posts: 5,234
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braumeister, can you source that quote for me please?
OldShooter, thanks. In the applicable situation, there is a charity already like that which may be a good idea to fund.
__________________
"At times the world can seem an unfriendly and sinister place, but believe us when we say there is much more good in it than bad. All you have to do is look hard enough, and what might seem to be a series of unfortunate events, may in fact be the first steps of a journey." Violet Baudelaire.
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02-26-2021, 02:50 PM
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#5
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Moderator
Join Date: Feb 2010
Location: Flyover country
Posts: 17,996
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Quote:
Originally Posted by SecondCor521
braumeister, can you source that quote for me please?
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That just came from the Fidelity website. I didn't dig into the IRS regs for it.
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I thought growing old would take longer.
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02-26-2021, 03:59 PM
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#6
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Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Join Date: Jun 2006
Location: Boise
Posts: 5,234
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Thanks, braumeister!
__________________
"At times the world can seem an unfriendly and sinister place, but believe us when we say there is much more good in it than bad. All you have to do is look hard enough, and what might seem to be a series of unfortunate events, may in fact be the first steps of a journey." Violet Baudelaire.
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02-26-2021, 04:34 PM
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#7
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Thinks s/he gets paid by the post
Join Date: Aug 2015
Posts: 1,188
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I just looked this up last week on the IRS site and got the same answer. No can do.
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Don't do something, just stand there!
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