December 2010: Planned Giving Tip of the Month

One-Time Tax Saving Opportunity Before December 31,2010

By, Patricia A. Rowe, Esq., CPA


In 2010 everyone is allowed to convert their traditional IRA’s, 401k’s and pension plans to Roth IRA’s. You can convert all or part of your pension plans. Normally, there is an Adjusted Gross Income (“AGI”) limitation, that is, if your AGI is greater than $ 100,000 you cannot do a Roth IRA conversion. For 2010 not only is there no limit on who can do a conversion, but you can choose to pay 50 % of the tax on your 2011 and 50 % on your 2012 tax returns.

Unlike a distribution from a traditional IRA which is fully taxable, if you keep your contribution (including converted funds) in your Roth IRA for 5 years, any withdrawals including all income earned and capital appreciation is not taxable on distribution. So when you convert all or part of a traditional IRA, 401k or pension plan to a Roth IRA, it counts as a distribution from your IRA, etc. and is taxable in the year of distribution. However, under this special rule you can spread the income over the next two years and pay the tax on the 2011 and 2012 tax returns.

If for some reason you decide you don’t want to do the conversion you have until the extended due date of the returns to change your mind and put the investments back into your traditional IRA or 401(k). So if you extend your returns you may have until October 15, 2011 to change your mind.


Offset the Additional Income with Charitable Contributions

If you are planning to donate to your favorite charity, such as the Ruth Bancroft Garden, it may be beneficial to do it by year end to get the deduction into this taxable year. If you do a Roth IRA conversion, think of offsetting the extra income with a charitable contribution.


You may get a greater tax benefit from a charitable contribution in 2010 than next year due to the fact that the itemized deductions phase-out comes back in 2011. That is, if your adjusted gross income exceeds a certain amount, the amount of the itemized deductions that are allowed to offset your income is decreased.

Additionally, keep in mind that there are several very good planning techniques available to generate charitable contribution deductions, such as charitable lead annuity trusts and charitable lead unitrusts that are most beneficial and generate greater deductions in times of low interest rates. These are just a few examples of charitable giving whereby the charitable organization receives an annuity stream of income, your family receives the remainder interest and you get a charitable deduction now. Watch our newsletter for future articles on these and other subjects.

Please feel free to contact Law Offices of Patricia Rowe 925-256-1000 for further information. Website at

Mission Statement
The mission of the Ruth Bancroft Garden, Inc. is to preserve this exceptional example of garden design and to continue to develop its collection of water-conserving plants for the education and enjoyment of the public.
The Ruth Bancroft Garden GardenConservancy