Where to enter CRUT donation in TurboTax?

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dmcmahon
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Where to enter CRUT donation in TurboTax?

Post by dmcmahon » Sun Mar 13, 2016 5:47 pm

I set up a Charitable Remainder Unitrust last year, using appreciated stock. I have a letter from my lawyer with the details regarding the allowable deduction based on actuarial calculations. Problem is, I have no idea where or how to enter this amount in TurboTax.

100% of my past experience with TT is with cash donations, which are dead bang easy. There is a dicey-looking series of menus regarding property donations but that looks like a rabbit-hole. That is to say, it looks like it's designed for situations such as donating a car, or clothes, or art, or something that you permanently hand over and need to value. That's obviously not the case with the CRUT donation, where the value transferred is not 100% deductible, only the actuarial value, and there are also rules limiting the amount that can be deducted in a single tax year based on your income. So I feel like I need to enter it in some sort of purpose-built UI but I can't find one.

Help!

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FiveK
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Re: Where to enter CRUT donation in TurboTax?

Post by FiveK » Sun Mar 13, 2016 6:35 pm

As of two years ago, TT does not handle a CRUT donation: https://ttlc.intuit.com/questions/22853 ... r-unitrust.

You might check your current version to see if it has Form 5227.

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dmcmahon
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Re: Where to enter CRUT donation in TurboTax?

Post by dmcmahon » Sun Mar 13, 2016 7:26 pm

I had an accountant prepare 5227 for the trust. It's been filed with the IRS. California has it's own form, also prepared by the accountant and filed. The trust issued a K1 to me for the 2015 unitrust amount, which I'll report this year. TT has a place for me to enter that. So far so good.

The issue is with regard to the contribution I made establishing the trust. I was told that part of this donation is deductible, and I was given a precise figure calculated according to IRS rules by my attorney. The question is how to deduct this in TurboTax. If that's not possible I'm completely stuffed.

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HueyLD
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Re: Where to enter CRUT donation in TurboTax?

Post by HueyLD » Sun Mar 13, 2016 7:34 pm

Per TT:

"Where to enter in Turbo Tax:

Type charitable contributions in the search box and then press Enter.

You will be prompted to Jump to charitable contributions, click the link.

You will arrive to the Donations to Charity screen, Answer Yes to Did you make donations to charity in 2014?

Continue to follow and answer questions until prompted to enter money donations."

https://ttlc.intuit.com/questions/28210 ... -what-form

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dmcmahon
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Re: Where to enter CRUT donation in TurboTax?

Post by dmcmahon » Sun Mar 13, 2016 8:44 pm

Nope, that doesn't work. If you "retained an interest in the property transferred" it says you can't use TT. I didn't really retain any interest in the property, but I have an interest in the trust, which seems like it's the same idea. Sign - another call to my attorney.

The needed form is 8283. TurboTax can generate it, but only if the property is 100% donated. Otherwise TurboTax throws up its hands. Even worse, TurboTax won't let you hand edit the form in forms mode. That's too bad because at least for my situation it's a relatively easy form to complete.

Bottom line is I'm stuck doing a paper return or hiring an accountant.

inbox788
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Re: Where to enter CRUT donation in TurboTax?

Post by inbox788 » Sun Apr 17, 2016 1:28 pm

OP, any resolution?

Is this filing an annual thing or a one time thing the year of establishing the CRUT? I've been looking into a CRUT, but am just learning about the benefits, risks and complications. I don't want to go down a path that will complicate my taxes for the future, and the sparsity of discussion about CRUTs here make me think it's not really worth it or overly complicated that it's just not all that popular.

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dmcmahon
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Re: Where to enter CRUT donation in TurboTax?

Post by dmcmahon » Wed Apr 20, 2016 7:25 am

I was able to trick TT into producing a mostly correct tax return, except for that one form. What I did is lie to TT about the property - I said yes to the question about transferring 100% of the interest in the property, but then entered the deductible value calculated by my attorney as if it were the full value. Later, I told TT that the donation was to a 30% income limited organization (see below). What that did is cause TT to compute all other forms correctly. However, Form 8283 is generated incorrectly filled out, and cannot be edited by hand within TT. To get around it, I printed the entire thing out and then pulled out that one incorrect page. I replaced it with a page I believe is correct - I downloaded the PDF for 8283 directly from the IRS and followed the relatively simple instructions.
It means that for this year I will have to file by mail, instead of e-filing as I usually do. Although I believe the paper return is now correct, I'm not entirely sure, so please no one take the foregoing as anything other than an interesting story, and certainly not as a how-to for solving this problem. I filed for an extension and am going to have my accountant review it, and if necessary redo it.
In answer to your question about whether a CRUT will complicate your tax returns forever:
The CRUT will generate K1 income annually, so it's a minor headache in the long run on your personal return.
The return for the CRUT itself is something you'll probably need an accountant for - the income buckets are complex and TT for Trusts can't handle Form 5227, as noted in the early part of this thread. If some institution is going to do all this for you and act as trustee is should be a non-issue for you.
The particular issue that got me on my personal return will be a headache for a few more years because of the size of the gift, relative to my income. The IRS limits charitable donations to 50% of your income for most charities, and 30% for things like CRUTs. My deduction was capped due to this rule, meaning I'll have to deduct the balance of it over the next 1-2 years. And therefore meaning I'll have the same problem with form 8283 next year, and possibly the year after, but once I've cleared the deduction it should be smooth sailing.

inbox788
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Re: Where to enter CRUT donation in TurboTax?

Post by inbox788 » Wed Apr 20, 2016 12:56 pm

dmcmahon wrote:In answer to your question about whether a CRUT will complicate your tax returns forever:
The CRUT will generate K1 income annually, so it's a minor headache in the long run on your personal return.
The return for the CRUT itself is something you'll probably need an accountant for - the income buckets are complex and TT for Trusts can't handle Form 5227, as noted in the early part of this thread. If some institution is going to do all this for you and act as trustee is should be a non-issue for you.
The particular issue that got me on my personal return will be a headache for a few more years because of the size of the gift, relative to my income. The IRS limits charitable donations to 50% of your income for most charities, and 30% for things like CRUTs. My deduction was capped due to this rule, meaning I'll have to deduct the balance of it over the next 1-2 years. And therefore meaning I'll have the same problem with form 8283 next year, and possibly the year after, but once I've cleared the deduction it should be smooth sailing.
Thanks for the update. Sounds like moderate tax headaches for the short run and some ongoing issues to be aware of, but hopefully will be handled by the institution as you mention. My interest is not immediate, but future planning. I'm looking at tax efficient donations and am already doing DAF for appreciated stocks. I'm also looking at annuities, and that's what got me interested in CRUTs which seem to combine things for additional benefit to the charity, but at added complexity. I was considering starting a minimum CRUT now (while I'm in a higher tax bracket vs in retirement) and adding in future years as opposed to doing a big lump sums, either immediately or in the future and ending up with some limit on the gift size or tax deduction. But so far I'm still having trouble understanding all the aspects and consequences, and so I'm going to stew on this a bit longer. If the benefits aren't all that much, especially for smaller accounts, life will be simpler using simpler methods.

http://www.thesimpledollar.com/charitab ... etirement/

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dmcmahon
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Re: Where to enter CRUT donation in TurboTax?

Post by dmcmahon » Wed Jun 08, 2016 11:32 pm

I had a windfall, otherwise I would have just kept things simple. I received an in-kind distribution of appreciated stock shares from a partnership. Setting up the CRUT and donating the shares now while I'm still in a high tax bracket made a lot of sense. Effectively the charities will get more cash because their share of the capital gain won't be taxed, and I get a larger tax deduction up front because I donated the property pre-tax.

My TT trick didn't work. Fortunately I did not send in the return, and my accountant caught the problems on review. I had him completely re-do the return to make sure it was correct. Besides the problem with form 8283, for which TT can't handle a property gift of an interest less than 100%, it had some sort of problem with the deductibility limits. A CRUT is typically a 30% limited beneficiary, meaning you cannot deduct more than 30% of your income if given to such an entity. Whereas all my usual cash donations are to normal 50% limited beneficiaries. TT had screwed up how this was done - the deductions are supposed to go into buckets starting with the least favorable bucket first, according to the accountant. The net result is that I still got full credit for the cash donations because they didn't add up to more than 20% of my income, while the 30% bucket was more than filled by the CRUT donation and the unused balance is carried over to 2016. Yeah, my eyes started to glaze over too.

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