Gift Planning
Planned Giving
Find out what types of assets make the best planned gifts. Learn about gifts of cash, securities and property.
Bob and Mary Are Giving Smarter and Achieving Their Dreams...Find Out How You Can Too!
Bob and Mary first met at Two-Bit Flicks, a 25-cent movie night held on Fridays in Brighton Lecture Hall. When the spring formal hosted by the women's dorm came around, Mary asked Bob to go with her. It was their first "official" date.
The rest, as the saying goes, is history. Or in Bob and Mary's case, it is natural history. That's because Emporia State also introduced them to a lifelong passion for the natural sciences.
Bob and Mary feel Emporia State was the catalyst for the life they've built together. Mary became a science educator for 6th, 7th, 8th and 9th grade students. Bob founded and served as director of the Great Plains Nature Center and became a renowned nature photographer.
Now they want others to have the same opportunity they did. They want to help students come to ESU and discover a passion they can follow for the rest of their lives.
Bob and Mary found a simple and easy way to achieve this dream. When they set up their trust, they named Emporia State as a beneficiary.
What's your dream?
Learn how easy it is to make your dream a reality by naming Emporia State University in your will or trust. Contact Angela Fullen, Director of Planned Giving at the Emporia State University Foundation. She can answer your questions or help you get started. If you have already named Emporia State in your will or trust, let us know. We will make sure your gift does everything you want it to do.
"I would encourage anyone, if they are thinking about doing something like this, to contact the Foundation. For us, it has been a great experience." - Mary Butel
Getting Started is Easy
Not sure how to take the first step? We've got just the thing you need. Download your free Will and Estate Planning Guide. This guide is an easy way to get started on, or update, your estate plan. It will help you explore your options at your own pace. It's free, easy and yours to keep.
Download your copy today or contact Angela Fullen to request a printed copy.
Angela Fullen
Director of Planned Giving
Telephone: 620-341-6465
[email protected]
Washington News
IRS Highlights Improved Customer Service
The IRS announced that it has dramatically increased its scanning capabilities over the 2022 tax filing season, with 225 times more forms scanned for a total of about 850,000 in 2023. The IRS has created a "Paperless Processing Initiative" and increased available online taxpayer forms fivefold this year. It continues to plan for a fully digital IRS by the tax filing season of 2025.
Werfel noted the IRS is now increasing the availability of a callback option, making it accessible to 95% of callers. He was enthusiastic about the IRS achievements this year. Werfel stated, "This is a milestone day in the history of the IRS. We know we need to do more; we need to do a lot more."
However, the IRA funds provided an "immediate and meaningful difference" in modernizing the agency. Werfel also noted the IRS improvements could be short-circuited by funding reductions. Werfel continued, "If we spend our capital budget to pay for our operational budget, we will have issues."
The June budget compromise between President Biden and House Speaker, Kevin McCarthy (R-CA), reduced the $80 billion increase for the IRS over a decade by approximately $21 billion. The 2024 IRS budget of $11.2 billion reflects this reduction.
Werfel noted the IRS funding increases are necessary for taxpayer data security. He stated, "We successfully defend a billion cyberattacks a year. What happens if we fall behind? We need to make sure we have the funding."
Editor's Note: Commissioner Werfel advocates for a continuation of the remaining $60 billion in increased IRS funding over the decade. In his view, this funding will allow the IRS to move forward and provide both data security and great service during the 21st century.
Timeshare Charity Fraud $8 Million Penalty Upheld
In James Tarpey v. United States; No. 22-35208 (9th Cir. 2023), the Ninth Circuit upheld a Montana District Court ruling that James Tarpey must pay nearly $8.5 million in promoter penalties for a tax avoidance charitable deduction scheme.
In 2006, James Tarpey formed Projects Philanthropy, Inc., d/b/a/ Donate for a Cause (DFC). This nonprofit was designed to facilitate the donation of unwanted timeshares. Tarpey also formed Resort Closings (RC), a for profit entity, to manage the timeshare real estate closings for the gifts to DFC. Donors paid a $149 donation fee and timeshare transfer fees to DFC. The timeshare gift deductions were supported by valuations completed by Tarpey, his sister, Suzanne Tarpey and two real estate appraisers, Ron Broyles and Curt Thor.
During 2010 through 2013, DFC received over 7,600 timeshare donations. DFC marketed the gifts of unwanted timeshares nationwide and promised substantial charitable deductions. However, the substantially inflated appraisals were not completed by qualified appraisers. Tarpey controlled DFC and RC.
In a prior proceeding, the Internal Revenue Service (IRS) accused Tarpey of operating a "bogus tax scheme." Between 2016 and 2017, the IRS obtained six court orders that enjoined Tarpey, his sister, the two appraisers, RC and DFC from accepting and appraising timeshare donations.
Under Section 6700, the IRS assessed penalties. The Montana District Court held Tarpey subject to penalties applicable under Section 6700(a)(2)(A). Tarpey was subject to penalties because he participated in this arrangement, he made false or fraudulent statements concerning the tax benefits from the arrangement, he had reason to know that the statements were false or fraudulent and the false or fraudulent statements pertained to a material matter.
The District Court determined the appraisals were false statements and Tarpey and the other individuals were not qualified appraisers. Under Reg 1.170A-13(c)(3)(i)(B), appraisals are qualified only if the appraisers perform the majority of appraisals for individuals other than the donee. Tarpey and the other timeshare appraisers "lacked sufficient independence from DFC to serve as qualified appraisers under the Treasury Regulations."
Tarpey also had reason to know that the inflated appraisals were false or fraudulent. While he contended that he received professional advice, there was no record of a named professional advisor.
Under Section 6700(a), a permissible method for computing penalties is an amount of 50% of the gross income from the activity. IRS expert Brian Dubinsky determined that the DFC and RC revenue was $22,323,437 between 2010 and 2013. The penalty based on the 50% calculation would be over $11 million, but the District Court awarded a penalty amount of $8,465,000 plus interest.
In his defense on appeal, Tarpey claimed appraisers Broyles and Thor were qualified and the penalty calculation did not correctly determine gross income from the arrangement.
Because 97.5% of Broyles' income was from DFC and 57% of Thor's appraisal business income were from DFC, they both failed the "majority of his or her appraisals made during his or her taxable year for other persons" standard. Therefore, neither Broyles nor Thor were qualified timeshare appraisers. Both Tarpey and his sister were also disqualified appraisers.
While DFC claimed to clients that the appraisals would be done by "an independent licensed appraiser," Tarpey had reason to know that all four appraisers were not qualified.
Tarpey also claimed the calculation of the penalty was not appropriate. Section 6700 (a) defines the avoidance scheme as an activity. The 2004 amendment to this statute by Congress defined activity to include each separate event. Therefore, the applicable standard was 50% of the gross income from the activity.
While Tarpey claimed that only the appraisals should be included in the calculation, the Ninth Circuit noted the 7,600 timeshare gifts were "an overarching scheme that flowed into further gross income for Tarpey and DFC." Therefore, the aggregation of income and the separate activity standard supported the IRS calculation.
Finally, Tarpey claimed that he was separate from Resort Closings. However, the evidence showed that Tarpey controlled both DFC and RC. Therefore, the penalty was applicable for the joint enterprise. Tarpey also claimed the penalty should be reduced by his expenses. However, the Ninth Circuit noted the penalty is based on gross income and is not reduced by expenses. The fact that Tarpey included the income amounts on his personal tax returns is additional evidence that he was in control of the entire scheme and, thus, penalties were appropriate..
Valuation Dispute Over Potentially Stolen Artwork
In Estate of Jaglom v. Commissioner, the Internal Revenue Service (IRS) and the estate disputed the value of a Paul Gauguin painting with the title, Pommes, Cruche et Verre Irisé.
The IRS Office of Art Appraisal Services appraised the painting at a value of $3 million. In 2019, the painting was appraised by Sotheby's with a value of $1.8 million. The Sotheby appraisal assumed that it passed the provenance test.
Estate appraiser Abigail Hartman Associates (AHA) determined the painting had zero value because it was included in a German database of stolen art prior to World War II. In addition, the estate had previously offered to loan the painting for an exhibit at the Yale University Art Gallery. However, Yale declined to include the painting in the art show because of the question on provenance.
Editor's Note: The IRS and the estate have both taken extreme positions. The IRS claims that the uncertainty regarding provenance should not reduce the $3 million in value. The estate claims the provenance gap subjects the painting to a 100% reduction in value and the artwork is worth zero. The key question is the evidence on the provenance gap as of the date of death. While some paintings stolen by Nazis have been returned, due to the difficulty of proving ownership other paintings with a provenance gap during the 1930s and 1940s have not been returned. Therefore, there may be a middle ground approach with an appropriate discount based on the provenance evidence available as of the date of death. If there is a substantial risk that the painting would be returned to the heirs of the original owner, a significant discount from the $3 million in value would be appropriate.
Applicable Federal Rate of 5.0% for September -- Rev. Rul. 2023-16; 2023-37 IRB 1 (15 August 2023)
The IRS has announced the Applicable Federal Rate (AFR) for September of 2023. The AFR under Sec. 7520 for the month of September is 5.0%. The rates for August of 5.0% or July of 4.6% also may be used. The highest AFR is beneficial for charitable deductions of remainder interests. The lowest AFR is best for lead trusts and life estate reserved agreements. With a gift annuity, if the annuitant desires greater tax-free payments the lowest AFR is preferable. During 2023, pooled income funds in existence less than three tax years must use a 2.2% deemed rate of return. Charitable gift receipts should state, "No goods or services were provided in exchange for this gift and the nonprofit has exclusive legal control over the gift property."
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