Partner News

Did you know that some farmers can save taxes by giving commodities instead of cash?  Farm commodities, such as grain, livestock, milk and eggs make valuable gifts to your local church and Village Missions. Besides being first-fruit gifts, farm commodity gifts are simple to make.

Here’s an example:

In 2003, Amanda Smith, a farm operator, donated 1,000 bushels of soybeans to her church. The donation represented the production from 15 acres. Amanda’s cost of production was $4,000, and the FMV at the time of the donation was $5,000. For 2003, Amanda was on the cash method of accounting.

Amanda will deduct the $4,000 of production expense on her 2003 Schedule F. She will not report any income from the gift nor will she deduct any charitable contribution. Assuming Amanda is married, does not have enough itemized deductions to exceed her standard deduction, is in a 25% federal income tax bracket, and a 3% state income tax bracket, her tax savings is $2,007 more than selling the beans and making a cash donation of $5,000 to her church.

Thanks to: Farmdoc, University of Illinois

http://www.farmdoc.uiuc.edu/legal/articles/ALTBs/ALTB_04-08/ALTB_04-08.html

Village Missions is not engaged in rendering legal, accounting or other professional service.  Farmers should consult with a competent professional tax advisor prior to making a gift.

Are you feeling a little stretched financially? 

Here’s an interesting web site that puts Western affluence in perspective.  Go to this web site, enter your annual income, and see where you stack up against the rest of the world. 

 http://www.globalrichlist.com/

If your income is $50,000 or more, you are in the top 1% of the world’s richest.

What a reminder of why God gives wealth.  As Paul tells us “You will be made rich in every way so that you can be generous on every occasion, and through us your generosity will result in thanksgiving to God.”  2 Corinthians 9:11

As Randy Alcorn has said, “God prospers me not to raise my standard of living, but to raise my standard of giving.”   

(Thanks to Jason Pearson at http://www.ministryrecess.com/)

Praise the Lord - the installation of the water line has been completed.  The design for the water system is nearly complete, and the pump house will soon be constructed.

Orders have been placed for homes 2,3, and 4, which will be in place by summer’s end. 

Those involved in this project have noticed how smoothly things have gone, and how well the various parts have been orchestrated.

We know it is the Lord who is working all things together for His glory!

Our excavator has completed the culvert and detention pond, and is ready to go on house lot #1.

Please pray as plans for the water system are to be completed by Friday, June 8th. 

Every year Americans contribute to IRAs, 401k plans, and other retirement plans, building resources that help them secure a comfortable retirement.  And, thanks to careful, diligent saving, many families are waking up to an attractive nest egg in their retirement years.

Statistics indicate that most people take only minimum withdrawals from their IRAs for a number of years after age 70 1/2.  As a result, many retirement fund balances do not diminish until retirees are well into their eighties, if at all.  This means that retirement accounts are often a substantial portion of the estate at death.

The most common way retirement funds are transferred is by naming a child as the beneficiary of the retirement plan.  And while this seems on the surface to provide children with a nice inheritance, transferring retirement funds in this manner can result in the highest levels of taxation, dramatically shrinking the actual amount realized by family.

For example, a $1 million dollar IRA could be subject to federal estate tax, state inheritance tax, and federal and state income tax.  The net result of this taxation can easily approach 60% . . . leaving only 40% for the children . . . or $400,000 of the original $1 million plan.

Retirement accounts are excellent tools for amassing funds, but make poor inheritance plans.  However, there is good news.  Some careful planning can result in minimum tax and maximum returns. 

This report discusses the pitfalls that both IRA owners and beneficiaries can fall into, and the techniques to avoid them.  Please note - the planning techniques described in this report are not all applicable to Roth IRAs.  Consult your tax or legal advisor for advice regarding your specific situation.

A Typical Estate

Let’s take a look at the Estate of Mary Smith.  Mary has a typical estate of $500,000 which includes a $50,000 IRA.  Mary has been a faithful supporter of a charity and desires to leave a tenth of the estate to that charity.  

The typical plan is to allow the children to receive the IRA under the IRA beneficiary designation and to transfer $50,000 by will from the remaining assets to the charity.  Since the estate assets generally include a home, perhaps stocks and bonds, cash and CDs and land, the assets given to charity would come from the type of assets that could be given to family with no income taxation to the family.  That is, assets that enjoy a “step-up” in basis. 
However, IRAs do not receive a “stepped-up” basis.  The recipient will pay income tax on the entire amount of IRA assets when they are distributed.  The chart illustrates that the IRA passed to the children has shrunk by $15,000, or 30%.  Larger estates that exceed estate tax limits will experience more significant tax impact.  The important point to keep in mind from this simple illustration is that even the smallest estates will experience a tax impact if the distribution of retirement assets is not handled carefully.

Continue for “A Better Solution”….  Read the rest of this entry »