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Lev, Tax Advisor
Category: Tax
Satisfied Customers: 29797
Experience:  Taxes, Immigration, Labor Relations
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Contribution to church from 401K I am planning on givinga

Resolved Question:

Contribution to church from 401K
I am planning on givinga total of $150,000 from my 401K Retirement account to the building fund of my church. I am planning on giving $50,000 each year for 3 years.
Question: In what way do I give this gift to the church to pay the least amount of taxes?
I am 69 years old – birth date 5/26/1942. My annual income is $40,000 + $24,000 I withdraw from my 401K
My 401k is with a major brokerage firm (broker) in my name. The 401k consists of stocks of 62 companies both in the United States and foreign countries. My plan was to transfer $50,000 worth of stock certificates directly from my 401K account to a PNC church account. PNC would then sell the stocks and give the proceeds of the sale to the church.
The reason I wanted to make the contributions this way was to avoid capital gains tax on the contributed stocks.
However, the broker said they could not transfer stock certificates directly from my 401K account to a PNC church account. The broker said they would have to sell the stocks and give the money from the sale either to me or directly to the church.
The broker said if this was NOT a 401K account they would transfer stock certificates directly from my account to a PNC church account.
Submitted: 6 years ago.
Category: Tax
Expert:  Lev replied 6 years ago.


Hi and welcome to Just Answer!
First of all - there is no capital gain recognized for transaction inside your 401k plan.
For tax deferred amounts - such as 401k - only distributions are taxable - however distributions are taxable as regular income - and not as a capital gain.
Generally - you may do either sell shares inside your 401k and transfer funds to a charitable organization or transfer shares directly to a charitable organization. In case of transferring shares directly to a charitable organization - fair market values of shares will be treated as distribution.
However - while the law allowed transferring shares - you need to verify with your 401k administrator - all 401k plans are different and have different rules - so your broker might be correct.


The qualified charitable distribution provisions allow individuals age 70 1/2 or over to exclude from gross income up to $100,000 that is paid directly from their individual retirement accounts to a qualified charity.
As you are 69 now - I might suggest waiting some time till you will be at least 70 1/2, transfer funds from your 401k plan to the IRA account - and you may accomplish the qualified charitable distribution without including distributed amount into your income.
Let me know if you need any help or clarification.


If you take a distribution before age 70 1/2 - you will have to include the full amount of distribution into your taxable income, then you will be able to deduct your charitable contribution if you itemize.
Because of large charitable contribution your deduction in the current year might be limited.

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