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In reply to the discussion: Bloomberg News: Romney ‘rented’ Mormon church’s exemption to defer taxes for 15 years [View all]Igel
(35,300 posts)Complicated, so I'm more than willing to be corrected. Not just ranted against.
You take a chunk of assets. Presumably very appreciated investments of some sort. You put them in a tax-deferred account. You liquidate them. You've locked in your appreciation, tax-free. But upon your death it goes to the charity. The trust is irrevocable. You can't make it go away.
But you get no present-day tax write-off because you can't touch the cash. Every year you're given a chunk of the money, a percentage set by the terms of the trust. You pay taxes on the cash as it's given to you. But some of the earnings remains in the fund and, it's assumed, will go to the charity. You get a charitable-contribution deduction for that money. Only that money.
There are also gift and estate consequences. Not that they matter here. They're too long-term for 99.999 percent of Americans. (And most of those are over 70, which makes the idea of 'long-term' rather irrelevant.)
The law's changed over the years. It's likely that Romney couldn't have set up the trust with the amount it had (leaving the remainder that it will have) today. But it was, I presume, legal at the time.
It's big news, well, you don't need a scanning electron microscope to see it. Not compressible into a sound-bite. Complicated. And it while it probably saved him from paying something in taxes, "renting" the LDS' tax exemption seems a bit hyperbolic.