What if a donor took an IRA withdrawal in December (which he would like to gift to charity using the new Section 208 swapping provision) but also wrote a check to the same charity he wants to redirect the IRA funds to in December? Can he retroactively declare that his check in December was intended to his IRA gift?
Well, the law only says that you must write your swapping gift check to your qualified charity by February 1 – who is to say when that check needed to be written?
This is a real question came to me. The donor had waited on taking IRA withdrawals until late December but he also sent a check by year end.
I went back to the statute and found one more interesting nugget with this law. The law actually says that your redirected IRA gift “may be treated as a qualified charitable distribution to the extent that—(i) such portion is transferred in cash after the distribution to an organization described in section 408(d)(8)(B)(i) before February 1…” In layman’s terms, your donor can re-characterize gifts to qualified charities only after he distributed the IRA funds to himself (and makes the gift by February 1).
In other words, did this donor take his Dec. IRA withdrawal before he wrote the check to the charity? If so, he can re-characterize that gift by writing to the charity about his intent. If not, he would have to write a new check if he wants to not pay taxes on that Dec. IRA withdrawal.
NEXT QUESTION: This one came through this AM from a blog reader. What if the donor requested an IRA withdrawal in Nov. and the check was dated in Nov. but was received and deposited in December? Can he use the retroactive provision for the Nov./Dec. withdrawal? Tough question!
My initial take is that the actual “distribution” really didn’t happen until the person deposited the check – in December! But, from a practical point, the IRA administrator probably will report the distribution as of the date they cut the check. This is not necessarily the same rule as for charitable giving (mail box/post mark rule) – and I am not qualified to speak about IRA rules like this. I suggested reaching out to the IRA administrator and see what date they record the distribution. Maybe they can adjust it so that he can feel comfortable using the retroactive IRA feature?