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GiftLaw Pro Home   >  Chapter 3 - Deferred Gifts  >  3.3 Gift Annuity  >  3.3.8 Deduction for Unrecovered Basis  >  Basic Quiz

Basic Quiz - 3.3.8 Deduction for Unrecovered Basis

1. In most cases, part of each annuity payment is a recovery of basis.
           
2. Basis is what the donor pays for an asset, less depreciation deductions.
           
3. If a donor contributes cash for a gift annuity, his or her basis is the same as the cash value.
           
4. The donor's entire basis in property used to fund a gift annuity will be allocated 100% to the annuity and is spread out over the donor's life expectancy.
           
5. If a donor has no cost basis in an appreciated asset used to fund a gift annuity, there will still be some tax-free income.
           
6. If an annuitant of a gift annuity passes away before his or her life expectancy, any unrecovered basis in the contract is a tax deduction on his or her final income tax return.
           
7. Any unrecovered basis in a gift annuity contract at the death of the annuitant(s) is taken as a charitable income tax deduction on the annuitant's final income tax return.
           
8. If the entire charitable income tax deduction cannot be used on the annuitant's final tax return, the donor's heirs may use the unused deduction.
           
9. The older the annuitant, the higher the percentage of tax-free income.
           
10. It does not matter if cash or an appreciated asset is used to fund a gift annuity; the tax-free income is the same for both.