First RMD is due last day of year

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praxis
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First RMD is due last day of year

Post by praxis » Sun Oct 21, 2018 8:01 am

I turn 70 next year on June 30, 2019, and I believe that means my first RMD must come out of my IRA on Dec 30, 2019. Or does it?

How does the IRS define 70.5? If it's 6 "months" after my birthday, is it Dec 31st? Would my first RMD need to come out during calendar year 2020?

Dec 31,2019 is a Tuesday, so I assume I can execute a trade on New Year's Eve Day, but can I risk timing my trade and settlement date so my RMD is legal?

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Re: First RMD is due last day of year

Post by dwickenh » Sun Oct 21, 2018 8:07 am

The RMD just has to be taken during the tax year you turn 70 1/2 or up to the following April 1st for the first RMD.. But if you wait til the following year, you have to take 2 RMDs in one tax year. I would just take it any time between Jan 1st 2019 and the end of the year. Your birthday does qualify for 70.5 next year as far as I can tell.

Edited to correct for next years birthday.
Last edited by dwickenh on Sun Oct 21, 2018 4:59 pm, edited 4 times in total.
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Re: First RMD is due last day of year

Post by livesoft » Sun Oct 21, 2018 8:10 am

dwickenh wrote:
Sun Oct 21, 2018 8:07 am
The RMD just has to be taken during the tax year you turn 70 1/2 or up to the following April 15th for the first RMD.. But if you wait til the following year, you have to take 2 RMDs in one tax year. I would just take it any time between now and the end of the year. Your birthday does qualify for 70.5 this year as far as I can tell.
You probably didn't mean "now." ;)
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Re: First RMD is due last day of year

Post by BL » Sun Oct 21, 2018 8:15 am

praxis wrote:
Sun Oct 21, 2018 8:01 am
I turn 70 next year on June 30, 2019, and I believe that means my first RMD must come out of my IRA on Dec 30, 2019. Or does it?

How does the IRS define 70.5? If it's 6 "months" after my birthday, is it Dec 31st? Would my first RMD need to come out during calendar year 2020?

Dec 31,2019 is a Tuesday, so I assume I can execute a trade on New Year's Eve Day, but can I risk timing my trade and settlement date so my RMD is legal?
It is legal as you have until April to get it done. Your risk is that you would be withdrawing 2x RMD the next year. You decide if you can live with that. Why wait that long, anyway?

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Re: First RMD is due last day of year

Post by dwickenh » Sun Oct 21, 2018 8:17 am

livesoft wrote:
Sun Oct 21, 2018 8:10 am
dwickenh wrote:
Sun Oct 21, 2018 8:07 am
The RMD just has to be taken during the tax year you turn 70 1/2 or up to the following April 15th for the first RMD.. But if you wait til the following year, you have to take 2 RMDs in one tax year. I would just take it any time between now and the end of the year. Your birthday does qualify for 70.5 this year as far as I can tell.
You probably didn't mean "now." ;)
oops didn't notice the 2019 date. :oops:
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Re: First RMD is due last day of year

Post by praxis » Sun Oct 21, 2018 8:29 am

BL wrote:
Sun Oct 21, 2018 8:15 am
praxis wrote:
Sun Oct 21, 2018 8:01 am
I turn 70 next year on June 30, 2019, and I believe that means my first RMD must come out of my IRA on Dec 30, 2019. Or does it?

How does the IRS define 70.5? If it's 6 "months" after my birthday, is it Dec 31st? Would my first RMD need to come out during calendar year 2020?

Dec 31,2019 is a Tuesday, so I assume I can execute a trade on New Year's Eve Day, but can I risk timing my trade and settlement date so my RMD is legal?
It is legal as you have until April to get it done. Your risk is that you would be withdrawing 2x RMD the next year. You decide if you can live with that. Why wait that long, anyway?
I thought the rule meant I had to wait until I after turned 70.5 to withdraw and pay tax on my first RMD. I prefer NOT to take two RMDs in the same calendar (tax) year. If any RMD taken BEFORE the beginning of the year I turn 70.5 doesn't count as an RMD, is the first date I can take my first RMD Dec 30 or Dec 31, 2019?

Or, are you saying the rule is I must take my first RMD during the (tax) year I turn 70.5. That is 2019, even though it's the last day of the year that I turn 70.5. So I can take my first RMD any time during 2019 and claim it on my 2019 taxes. I do not have to wait until "after" I turn 70.5. Right?

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Re: First RMD is due last day of year

Post by oldcomputerguy » Sun Oct 21, 2018 8:37 am

praxis wrote:
Sun Oct 21, 2018 8:01 am
I turn 70 next year on June 30, 2019, and I believe that means my first RMD must come out of my IRA on Dec 30, 2019. Or does it?
No, you can take it earlier if you wish. You could withdraw it all in July, for example. It just must be taken before the deadline, which is December 31 of each year (with the exception that you can delay your first RMD until April 1 of the following year, but that will result in two RMDs in one year, which might mess up your tax picture).
How does the IRS define 70.5? If it's 6 "months" after my birthday, is it Dec 31st? Would my first RMD need to come out during calendar year 2020?
https://www.irs.gov/retirement-plans/pl ... tions-rmds
You reach age 70½ on the date that is 6 calendar months after your 70th birthday.

Example: You are retired and your 70th birthday was June 30, 2017. You reached age 70½ on December 30, 2017. You must take your first RMD (for 2017) by April 1, 2018.

Example: You are retired and your 70th birthday was July 1, 2017. You reached age 70½ on January 1, 2018. You do not have an RMD for 2017. You must take your first RMD (for 2018) by April 1, 2019.
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Re: First RMD is due last day of year

Post by The Wizard » Sun Oct 21, 2018 8:38 am

Just take 1/12 of your RMD on the 15th of each month starting in January.
This gives your custodian two weeks to set up the initial payment to you, should be no problem...
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Re: First RMD is due last day of year

Post by sbaywriter » Sun Oct 21, 2018 8:43 am

So I can take my first RMD any time during 2019 and claim it on my 2019 taxes. I do not have to wait until "after" I turn 70.5. Right?
Right.

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Re: First RMD is due last day of year

Post by ResearchMed » Sun Oct 21, 2018 8:47 am

praxis wrote:
Sun Oct 21, 2018 8:29 am
BL wrote:
Sun Oct 21, 2018 8:15 am
praxis wrote:
Sun Oct 21, 2018 8:01 am
I turn 70 next year on June 30, 2019, and I believe that means my first RMD must come out of my IRA on Dec 30, 2019. Or does it?

How does the IRS define 70.5? If it's 6 "months" after my birthday, is it Dec 31st? Would my first RMD need to come out during calendar year 2020?

Dec 31,2019 is a Tuesday, so I assume I can execute a trade on New Year's Eve Day, but can I risk timing my trade and settlement date so my RMD is legal?
It is legal as you have until April to get it done. Your risk is that you would be withdrawing 2x RMD the next year. You decide if you can live with that. Why wait that long, anyway?
I thought the rule meant I had to wait until I after turned 70.5 to withdraw and pay tax on my first RMD. I prefer NOT to take two RMDs in the same calendar (tax) year. If any RMD taken BEFORE the beginning of the year I turn 70.5 doesn't count as an RMD, is the first date I can take my first RMD Dec 30 or Dec 31, 2019?

Or, are you saying the rule is I must take my first RMD during the (tax) year I turn 70.5. That is 2019, even though it's the last day of the year that I turn 70.5. So I can take my first RMD any time during 2019 and claim it on my 2019 taxes. I do not have to wait until "after" I turn 70.5. Right?
You've written it quite well:

"If any RMD taken BEFORE the beginning of the year I turn 70.5 doesn't count as an RMD" -

That is, "BEFORE the beginning of the year you turn 70.5 doesn't count..."

That is, anytime during the year you turn 70.5 is just fine (ditto for subsequent years - anytime *during* the year), with the only exception being that first year when you turn 70.5, you have the choice to delay that first year and take two RMD's the year you turn 71.5.

Note: If one is still working and has only Employer plan funds, in some cases (might be plan dependent), one doesn't need to start until the year of separation. (Any IRA's still have the regular 70.5 rules.)

RM
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Re: First RMD is due last day of year

Post by oldcomputerguy » Sun Oct 21, 2018 8:48 am

dwickenh wrote:
Sun Oct 21, 2018 8:07 am
The RMD just has to be taken during the tax year you turn 70 1/2 or up to the following April 15th for the first RMD..
April 1, not April 15.
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Re: First RMD is due last day of year

Post by praxis » Sun Oct 21, 2018 8:52 am

Deadline for receiving required minimum distribution:
 Year you turn age 70 ½ - by April 1 of the following year
 All subsequent years - by December 31 of that year

I found the above on irs.gov and it seems clear that I will have until April 1, 2020 to take my first RMD.
And it would be claimed on my 2019 tax return. Then I have until Dec 31, 2020 to take my second RMD.

Wizard, what is the benefit of splitting my RMD into 12 monthly payments? Extending the appreciation
of the securities inside the IRA?

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Re: First RMD is due last day of year

Post by oldcomputerguy » Sun Oct 21, 2018 8:56 am

praxis wrote:
Sun Oct 21, 2018 8:52 am
I found the above on irs.gov and it seems clear that I will have until April 1, 2020 to take my first RMD.
And it would be claimed on my 2019 tax return. Then I have until Dec 31, 2020 to take my second RMD.
This is incorrect. If you take both your first and second RMDs in 2020, both will be taxed on your 2020 return.

https://www.irs.gov/retirement-plans/pl ... tions-rmds
The first year following the year you reach age 70½ you will generally have two required distribution dates: an April 1 withdrawal (for the year you turn 70½), and an additional withdrawal by December 31 (for the year following the year you turn 70½). To avoid having both of these amounts included in your income for the same year, you can make your first withdrawal by December 31 of the year you turn 70½ instead of waiting until April 1 of the following year.

Example: John reached age 70½ on August 20, 2017. He must receive his 2017 required minimum distribution by April 1, 2018, based on his 2016 year-end balance. John must receive his 2018 required minimum distribution by December 31, 2018, based on his 2017 year-end balance.

If John receives his initial required minimum distribution for 2017 on April 1, 2018, then both his 2017 and 2018 distributions will be included in income on his 2018 income tax return.
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Re: First RMD is due last day of year

Post by praxis » Sun Oct 21, 2018 9:56 am

Does my custodian file a different IRS form depending on whether my IRA withdrawal is intended as my RMD for a particular year or is it reported as any other IRA distribution?

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Re: First RMD is due last day of year

Post by The Wizard » Sun Oct 21, 2018 10:02 am

praxis wrote:
Sun Oct 21, 2018 8:52 am

...Wizard, what is the benefit of splitting my RMD into 12 monthly payments? Extending the appreciation
of the securities inside the IRA?
Uniform monthly cashflow.
Same as when you were working.
Same as SS.
Same as the portfolio withdrawals I've been doing for seven years prior to age 70...
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Re: First RMD is due last day of year

Post by sport » Sun Oct 21, 2018 10:07 am

praxis wrote:
Sun Oct 21, 2018 9:56 am
Does my custodian file a different IRS form depending on whether my IRA withdrawal is intended as my RMD for a particular year or is it reported as any other IRA distribution?
All withdrawals from an IRA are taxable in the year they are made. This is true for RMDs and any other withdrawals. The 1099-R shows total withdrawals for the year.

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Re: First RMD is due last day of year

Post by cheese_breath » Sun Oct 21, 2018 10:08 am

praxis wrote:
Sun Oct 21, 2018 9:56 am
Does my custodian file a different IRS form depending on whether my IRA withdrawal is intended as my RMD for a particular year or is it reported as any other IRA distribution?
Your 1099R does not distinguish between RMDs, QCDs or any other distributions.
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Re: First RMD is due last day of year

Post by The Wizard » Sun Oct 21, 2018 10:11 am

praxis wrote:
Sun Oct 21, 2018 9:56 am
Does my custodian file a different IRS form depending on whether my IRA withdrawal is intended as my RMD for a particular year or is it reported as any other IRA distribution?
Plain old 1099-R, nothing RMD specific...
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Re: First RMD is due last day of year

Post by sport » Sun Oct 21, 2018 10:11 am

There is one type of transaction that requires you to actually be 70.5 or older. That is making a Qualified Charitable Distribution (QCD). QCDs allow you to make donations to a qualified charity directly from your IRA and avoid paying the tax on that withdrawal. The best part is that a QCD can be part or all of your RMD. The only limitations are that you must be 70.5 at the time of the donation and you are limited to 100k per year.

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Re: First RMD is due last day of year

Post by BL » Sun Oct 21, 2018 1:35 pm

The first withdrawals of the year are always your RMDs. If you want some (or all) of your QCDs to be part of that required amount, you must do it before the RMDs are used up, or you would still have the RMDs taxed even though you can claim QCDs on your 1040 and do not pay tax on that amount.

Roth conversions would come after you have finished with RMD.

I have Vanguard calculate and keep track of RMDs, but not automatically do the withdrawals for me as that might complicate my QCDs. I call to get checks written for various charities.

After age ~59.5, you are allowed to withdraw any amount and simply pay the tax.

All IRA withdrawals are lumped together in your 1099.

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Re: First RMD is due last day of year

Post by praxis » Sun Oct 21, 2018 3:34 pm

duplicate post

sorry
Last edited by praxis on Sun Oct 21, 2018 3:38 pm, edited 1 time in total.

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Re: First RMD is due last day of year

Post by praxis » Sun Oct 21, 2018 3:36 pm

duplicate post
Last edited by praxis on Sun Oct 21, 2018 3:37 pm, edited 1 time in total.

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Re: First RMD is due last day of year

Post by praxis » Sun Oct 21, 2018 3:37 pm

praxis wrote:
Sun Oct 21, 2018 3:36 pm
BL...
praxis wrote:
Sun Oct 21, 2018 3:34 pm
[quote=

After age ~59.5, you are allowed to withdraw any amount and simply pay the tax.
Please explain.

Thanks

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Re: First RMD is due last day of year

Post by ResearchMed » Sun Oct 21, 2018 3:45 pm

praxis wrote:
Sun Oct 21, 2018 3:37 pm
praxis wrote:
Sun Oct 21, 2018 3:36 pm
BL...
praxis wrote:
Sun Oct 21, 2018 3:34 pm
[quote=

After age ~59.5, you are allowed to withdraw any amount and simply pay the tax.
Please explain.

Thanks
I think what is meant is that before age 59.5, although there are no RMD's yet, IF you want access to your IRA money, you'd have to pay the regular income tax PLUS a fee of (I think) 10%, as the penalty for removing prior to 59.5.

After 59.5, you *may* remove money from an IRA, but are not required to do so until the year you reach age 70.5.
But there's always that tax to be paid (unless you've got Roth IRA's, which has quite different rules).

RM
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Re: First RMD is due last day of year

Post by praxis » Sun Oct 21, 2018 5:01 pm

ResearchMed wrote:
Sun Oct 21, 2018 3:45 pm
praxis wrote:
Sun Oct 21, 2018 3:37 pm
praxis wrote:
Sun Oct 21, 2018 3:36 pm
BL...
praxis wrote:
Sun Oct 21, 2018 3:34 pm
[quote=

After age ~59.5, you are allowed to withdraw any amount and simply pay the tax.
Please explain.

Thanks
I think what is meant is that before age 59.5, although there are no RMD's yet, IF you want access to your IRA money, you'd have to pay the regular income tax PLUS a fee of (I think) 10%, as the penalty for removing prior to 59.5.

After 59.5, you *may* remove money from an IRA, but are not required to do so until the year you reach age 70.5.
But there's always that tax to be paid (unless you've got Roth IRA's, which has quite different rules).

RM
OK
I understand
thanks

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Re: First RMD is due last day of year

Post by One Ping » Sun Oct 21, 2018 7:59 pm

praxis wrote:
Sun Oct 21, 2018 8:01 am
I turn 70 next year on June 30, 2019, and I believe that means my first RMD must come out of my IRA on Dec 30, 2019.
Not to derail the thread, but how does one deal with making a QCD for 2019 in this situation? You cannot make a QCD until you are "literally" 70.5, but having to execute it on EXACTLY a specific day at the end of the year seems extraordinarily difficult. Thoughts?
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Re: First RMD is due last day of year

Post by sport » Sun Oct 21, 2018 8:18 pm

One Ping wrote:
Sun Oct 21, 2018 7:59 pm
praxis wrote:
Sun Oct 21, 2018 8:01 am
I turn 70 next year on June 30, 2019, and I believe that means my first RMD must come out of my IRA on Dec 30, 2019.
Not to derail the thread, but how does one deal with making a QCD for 2019 in this situation? You cannot make a QCD until you are "literally" 70.5, but having to execute it on EXACTLY a specific day at the end of the year seems extraordinarily difficult. Thoughts?
If you want to make a QCD on 12/30/19, you call the IRA custodian before 4:00 PM on that day and request that they write a check to the charity, and mail the check to you. The date of the withdrawal is the date that counts for the QCD. The receipt from the charity comes later. You can photocopy the check to show the date of 12/30 printed on it. If that QCD is part of the RMD, you would probably ask for the balance of the RMD at that time as well. 12/30/19 is a Monday. You could also do it on 12/31/19, but making important transactions on new year's eve is probably not the best idea.

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Re: First RMD is due last day of year

Post by One Ping » Sun Oct 21, 2018 8:22 pm

So, it's the date of withdrawal, not the date the charity gets/deposts the check.

Can I expect Vanguard to cut the check on the day I call?
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Re: First RMD is due last day of year

Post by sport » Sun Oct 21, 2018 8:26 pm

One Ping wrote:
Sun Oct 21, 2018 8:22 pm
So, it's the date of withdrawal, not the date the charity gets/deposts the check.

Can I expect Vanguard to cut the check on the day I call?
I would expect them to cut the check either that day or the next. However, the transaction will occur on the day you call as long as it is a business day and you call before 4:00 PM Eastern Time.

Now if you write the check yourself, then it depends on when the charity cashes the check and the custodian makes the withdrawal to pay the check. So, you do not want to use this method near the end of the year.

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Re: First RMD is due last day of year

Post by One Ping » Sun Oct 21, 2018 8:30 pm

sport wrote:
Sun Oct 21, 2018 8:26 pm
One Ping wrote:
Sun Oct 21, 2018 8:22 pm
So, it's the date of withdrawal, not the date the charity gets/deposts the check.

Can I expect Vanguard to cut the check on the day I call?
I would expect them to cut the check either that day or the next. However, the transaction will occur on the day you call as long as it is a business day and you call before 4:00 PM Eastern Time.

Now if you write the check yourself, then it depends on when the charity cashes the check and the custodian makes the withdrawal to pay the check. So, you do not want to use this method near the end of the year.
You would not expect a problem then if the transaction date was 12/30, but the check date was 1/2 (say 12/30 was a Friday, next business day on Monday, 1/2) or maybe even Tuesday 1/3?
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Re: First RMD is due last day of year

Post by sport » Sun Oct 21, 2018 9:01 pm

One Ping wrote:
Sun Oct 21, 2018 8:30 pm
sport wrote:
Sun Oct 21, 2018 8:26 pm
One Ping wrote:
Sun Oct 21, 2018 8:22 pm
So, it's the date of withdrawal, not the date the charity gets/deposts the check.

Can I expect Vanguard to cut the check on the day I call?
I would expect them to cut the check either that day or the next. However, the transaction will occur on the day you call as long as it is a business day and you call before 4:00 PM Eastern Time.

Now if you write the check yourself, then it depends on when the charity cashes the check and the custodian makes the withdrawal to pay the check. So, you do not want to use this method near the end of the year.
You would not expect a problem then if the transaction date was 12/30, but the check date was 1/2 (say 12/30 was a Friday, next business day on Monday, 1/2) or maybe even Tuesday 1/3?
If the transaction date was 12/30, then the withdrawal would show up on your 1099R for that year. The date of the transaction is what counts. That being said, I would think the date on the check would match the withdrawal date, but it really would not matter.

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Re: First RMD is due last day of year

Post by Alan S. » Sun Oct 21, 2018 9:46 pm

The year end date ramifications are not all clear. Kitces addresses these issues here:
End Of Year Deadline For IRA Charitable Contributions

In order to receive favorable treatment for a QCD in the current tax year – including having the RMD satisfied for the current tax year, and falling under the current year’s maximum QCD contribution limit – the charity should ideally cash the QCD check by December 31st. In practice, this means beginning the process to complete the QCD by mid-December, as most IRA custodians will insist that the check be payable to the charity but still mail it to the IRA owner first (who must then forward it on to the charity); to get the check payable to and sent directly to the charity will in most cases require a Medallion guarantee (a similar but more stringent process than getting a signature notarized), which usually has to be mailed in once completed (creating even further delays).
Notably, there is still some debate about what exactly constitutes a completed donation in the case of a QCD in order to meet the end-of-year deadline. Some have suggested that the charity merely needs to receive the check by December 31st – such that the charity is in constructive receipt of the distribution – even if the check isn’t cashed until after the end of the year. And Treasury Regulation 1.170A-1(b) stipulates that when a normal (non-IRA-related) check contribution is made to a charity, the date that the check is mailed is sufficient (even if not received by the charity until after the end of the year); in theory, this might be applied for a direct distribution of the charitable distribution from the IRA to the charity (if a Medallion signature is obtained) based on the date that the IRA custodian cuts the check.
However, these interpretations have never been applied directly to evaluate the deadline for making an IRA charitable distribution, so ideally the check itself should be deposited by the charity by December 31st – and clearly shown as a completed distribution on the end-of-year IRA statement – to ensure credit in the proper tax year.

If you mail the check at year end, at the very least I suggest getting a receipt (probably a certified mail receipt) no later than 12/31 if the amount of the QCD is significant. You will probably be OK with that even when the charity does not cash the check until the following year. However, getting a receipt from the charity of actual check receipt in the applicable year is certainly preferable.

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