Meadville Medical Center
  • Contact Us
  • Titusville Area Hospital
  • Pay My Bill
  • Services
    • Find a Doctor
      • Patient & Visitors
        • Locations
          • About Us
            • Call Today Call Today
            • Email Us
            • Our Map
            • Menu
              Home
              Services
              Find a Doctor
              Patient & Visitors
              Locations
              About Us
              Medical Professionals
              Patient Portal
              Employee Resources
              Events
              eCards
              Blog
              Contact Us
              Privacy Policy
              Site Map
            • Audiology Center
            • Behavioral Health Services
            • Cancer Treatment
            • Cardiology
            • Dental Care
            • Dermatology
            • Drug & Alcohol Treatment
            • Ear, Nose & Throat
            • Emergency Department
            • Endocrinology
            • Family Medicine
            • Family Planning Services
            • Gastroenterology
            • Home Health
            • Hospice & Palliative Care
            • Hospitalist
            • Internal Medicine
            • Kidney & High Blood Pressure Treatment
            • Laboratory Services
            • Massage Therapy
            • Medical Assistance Transportation
            • Mind-Body Wellness Center
            • Nephrology
            • Neurology
            • Nutrition Services
            • OB/GYN
            • Occupational Therapy
            • Orthopedics
            • Pain Management
            • Physical Therapy
            • Physical Rehabilitation Inpatient Services
            • Pulmonology
            • Pulmonology Rehabilitation Services
            • Radiology
            • Resident Physicians/Medical Students
            • Respiratory Care
            • Rural Health Centers
            • Sleep Diagnostic Services
            • Speech Therapy
            • Sports Medicine
            • Surgery
            • Intensive Transitional Care at MMC
            • Intensive Transitional Care at TAH
            • Urgent Care Centers
            • Urology
            • Women's Health Therapy
            • Women, Infants & Children Nutrition Program
            • Vernon Women's Center
            • Workplace Health
            • Wound Clinic
            • J
            • Visitor Policy
            • Meadville Area Free Clinic
            • Physicians Accepting New Patients
            • Quality of Care
            • Patient Portal
            • Community Health Needs Assessment
            • Request Information
            • Billing & Insurance
            • Admissions
            • Preparing for Surgery
            • Population Health Management
            • Drug & Alcohol Treatment Guide
            • Patient Relations
            • Around Town
            • Price Transparency
            • Interpreter Services
            • Send an eGreeting
            • Classes & Events
            • Mill Run Community Pharmacy
            • Titusville Area Hospital Outpatient Physical Therapy
            • Titusville Area Hospital Outpatient Lab
            • Meadville Medical Center Outpatient Lab
            • Titusville Express Care
            • Tionesta Health Center
            • Vernon Express Care
            • Yolanda G. Barco Oncology Institute
            • Oil City Lab
            • Saegertown Medical Associates
            • Outpatient Diagnostic Imaging
            • COVID-19 & Flu Evaluation Center
            • Oil Valley Internal Medicine
            • Valley Dental Center
            • Titusville Area Hospital Cardiac Rehabilitation
            • Oil Valley Internal Medicine Associates
            • Conneaut Valley Health Center
            • Oak Street Pediatrics
            • TAH Physician Clinics
            • Otolaryngology (ENT) Clinic
            • Poplar Street Medical Arts
            • Titusville Area Hospital
            • Meadville Pain Management
            • One Vernon Place
            • Hospice of Crawford County
            • Mind Body Wellness Center
            • MMC Foundation
            • Liberty Street Facility
            • Meadville Dermatology and Skin Surgery Institute
            • Meadville Community Health Center
            • Grove Street Facility
            • Cambridge Springs Health Center
            • Conneaut Lake Health Center
            • Alden Street Facility
            • Visitor Code of Conduct
            • Why MMC?
            • Mission & Vision
            • MMC Foundation
            • Pandemic Youth Response Initiative
            • Faces Behind YOUR MMC
            • Featured Staff Member
            • Previous Faces Behind Your MMC
            • About Us
            • Mission & Vision
            • Our Leadership
            • Our Promise
            • Contact Us
            • Ways to Give
            • Annual Fund
            • Selective Giving
            • Honor Roll of Contributors
            • Community Fundraisers
            • Planned Giving
            • For Advisors
            • Washington News
            • Case of the Week
            • Private Letter Ruling
            • Article of the Month
            • Deduction Calculator
            • Contact Us
            • Stories
            • Community Champions
            • Physician Philanthropist
            • Past Physician Philanthropists
            • Community Voices
            • Faces of Health
            • Who Are They?
            • Monthly Features
            • 2013 Faces of Health
            • 2014 Faces of Health
            • 2015 Faces of Health
            • 2016 Faces of Health
            • 2017 Faces of Health
            • Campaigns
            • Children's Health Network
            • Foundation Endowment
            • Past Campaigns
            • Events
            • Golf Outing
            • Community Fundraisers and Donations
            • Photos
            • Donate
            • Golf Outing
            • Awards
            • Administration
            • Board of Directors
            • MMC Auxiliary
            • Careers
            • Physician Opportunities
            • Volunteers
            • News
            • Contact Us
            814.333.5000
            Search Close
            About Us MMC Foundation Ways to Give For Advisors Case of the Week

            Ways to Give

            • Annual Fund
            • Selective Giving
            • Honor Roll of Contributors
            • Community Fundraisers
            • Planned Giving
            • For Advisors
            • Washington News
            • Case of the Week
            • Private Letter Ruling
            • Article of the Month
            • Deduction Calculator
            • Contact Us

            Case of the Week

            Dying to Deduct

            Case:

            Abigail was a wonderful and spirited 80-year-old woman. Even as an octogenarian, she still worked in her garden, handled all of her finances and played golf each weekend. In addition to her busy schedule, she also made time to help at a local homeless shelter. She believed that whenever you can lend assistance to your fellow neighbor it is your responsibility to do so. Because of this belief, she gave her time, love and money to the shelter. Abigail's normal practice was to give $5,000 each year to the homeless shelter. However, she wanted to make a more significant gift to the shelter this year.

            So, in January of this year, she decided to establish a $100,000 charitable gift annuity. She liked the high fixed payments, $49,000 tax deduction and simplicity of the arrangement. Because Abigail funded the CGA with cash, a large portion of each payment was tax-free. But of course, what she loved most was the eventual gift to the shelter.

            Sadly, Abigail suffered a heart attack in March and died soon after. It was a terrible loss to the community. Now several months have passed and Abigail's family and CPA are winding up Abigail's financial affairs. Despite living only several months this year, Abigail had $100,000 of income (mainly from an IRA distribution in January). The CPA knows he can deduct the $49,000 charitable tax deduction on Abigail's final tax return. However, he wonders if she is entitled to any other deduction since she passed away prematurely.

            In looking for this answer, the CPA contacts the shelter to inquire about the gift annuity. The shelter informs the CPA that Abigail never received a payment. The payments were quarterly; however, she passed away prior to the first payment.

            Question:

            Since Abigail died prematurely, does she get another tax deduction? If so, what type of deduction is available and how is it reported?

            Solution:

            Abigail's income from her gift annuity, as mentioned above, was partially tax-free. This tax-free component is essentially a return of principal, and it would last until the end of her life expectancy. Because Abigail passed away before the end of her life expectancy (and before even one payment), she did not receive any of her tax-free income. "Unrecovered investment" is the term for this shortfall of tax-free payments. Fortunately, the amount of unrecovered investment may be claimed as a deduction on Abigail's final income tax return.

            With a $100,000 cash CGA and charitable tax deduction of $49,000, Abigail's total investment in the annuity contract was $51,000. Because Abigail died prior to even one payment, she did not receive any tax-free income. Thus, Abigail had $51,000 of unrecovered investment in the annuity contract. See Section 72(b)(4).

            The CPA wondered how to deduct the $51,000. If the $51,000 is an additional charitable tax deduction, it will be lost due to the 50% AGI limitation rules. For instance, Abigail's AGI for this year is $100,000. As a result, $50,000 is the limit for cash gifts. But she already has a $49,000 charitable deduction which resulted from creating the CGA. So, any additional charitable tax deductions in excess of $1,000 would be unusable on her final income tax return.

            To the CPA's great delight, the $51,000 amount is not deducted as a charitable tax deduction, but rather as an "other miscellaneous deduction" (not subject to the 2% floor). This deduction can be claimed on Schedule A of Form 1040. Moreover, it is not subject to the 50% AGI limitation on charitable deductions. So, the CPA can claim a $49,000 charitable tax deduction and a $51,000 miscellaneous deduction all in the same year. Abigail's death, for tax purposes, transformed a potentially nondeductible item into a deductible item. Accordingly, these two deductions can effectively wipe out any taxable income on Abigail's final income tax return! This is a very nice benefit – especially since the shelter will receive a major part of Abigail's estate.

            Previous Articles

            Living on the Edge, Part 6

            Living on the Edge, Part 5

            Living on the Edge, Part 4

            Living on the Edge, Part 3

            Living on the Edge, Part 2

            What Are You Looking For?

            • Pay My Bills

            • Donate

            • Request Information

            • Medical Professionals

            • Careers

            • Patient Portal

            Helpful Links

            • About Us
            • Careers
            • Notice of Privacy
            • Employee Resources
            • Find a Doctor
            • Locations
            • Medical Professionals
            • Patients & Visitors
            • Patient Portal
            • Pay My Bill
            • Privacy Policy
            • Non-Discrimination Notice
            • Site Map
            • Titusville Area Hospital
            • Volunteer
            Address: 751 Liberty St., Meadville, PA 16335
            View Map [+]


            Phone: MMCHS - 814.333.5000
            Titusville - 814.827.1851
            Meadville Medical Center
            Meadville Medical Center © 2017 All Rights Reserved.
            Powered by Scorpion Healthcare