Estate and Gift Taxes

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Return to Fair Market Value Standard but with Tax on Amount of Appreciation as if Property

Sold and Proceeds Contributed 2263 Inclusion of Appreciation in the Minimum Tax in

Year of Contribution 2263 Retention of Present Reduction Rules with Increase

in Holding Period for Long-Term Capital Gain Treatment 2263 III Theoretical and Policy Considerations 2264 Comparative Treatment of Transfers of Appreciated Property . . . . 2264 Alternatives for the Donor 2265 Gift of Cash 2265 Gift of Net Proceeds Following a Sale 2265 Retention of Property or Proceeds of Sale 2265 Other Gratuitous Transfers 2266 Summary 2266 Views of Some Tax Professors 2266 The Effect of the Deduction as an Inducement 2267 Footnotes 2268 A Pro-Charity Substitute for the Present Law Tax Treatment of Appreciated Property Contributed to Charity Gerard M. Brannon (1975) 2273

Part III Volunteer Services

Treatment of Volunteer Services and Related Expenses Under the

Internal Revenue Code Edmund C. Bennett (1976) 2287 I History of the Rule 2287 II The Distinction Between Property and Services 2288 Criteria to be Used in Making the Distinction 2289 Factors Limiting the Effectiveness of the Criteria 2291 III Availability of a Deduction for Expenditures 2291 The Rule in General 2291 Factors to be Considered 2293 The Effectiveness of the Deduction 2294 Footnotes 2294

Part IV

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Introduction 2299 I History and Purposes of Estate Tax Deduction . . . . 2299 Importance of Bequests 2301 The Deduction as an Incentive to Charitable Bequests 2301 II Criticisms and Evaluation of Estate Tax Deduction . . . 2302 Criticisms 2302 The Charitable Deduction and the Objectives of the

Estate Tax Statute 2304 The Charitable Deduction as an Incentive to

Support of Charitable Organizations 2304 Effect of Changes in the Estate Tax Deduction 2305 III Conclusions 2306 Appendix A 2307 Appendix B: Foundation Grant Study 2308 Appendix C: Summary of Foundation Center Study 2311 Appendix D 2313 Footnotes 2317 Dimensions of Charitable Giving Reported on Federal Estate, Gift, and Fiduciary Tax Returns Emil M. Sunley, Jr. (1975) 2319 Summary of Data 2319 I Estate Tax Returns 2320 Time Series Data . 2321 Charitable Bequests by Size of Total Estate 2321 Charitable Bequests in Excess of Designated Percentages

of Economic Estates 2321 Charitable Bequests by Type of Recipient 2327 II Gift Tax Returns . 2327 Time Series Data 2328 Charitable Gifts by Size of Total Gifts Before Splitting 2328 III Fiduciary Income Tax Returns 2328 Footnotes 2336 Death, Taxes, and Charitable Bequests: A Survey of Issues and Options

Richard E. Wagner (1974) . 2337 Introduction . 2337

I Is the Charitable Deduction a Form of Governmental

Subsidy? . . . . 2338 The Charitable Deduction as a Tax Expenditure 2338 Policy Alternatives to the Charitable Deduction 2339 A Ceiling on Deductibility . 2339 A Tax Credit for Charitable Bequests . . . . . . 2340 A Matching Grant to Charitable Organizations 2341 In Support of the Charitable Deduction 2342

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II Constructive Realization of Capital Gains Upon Death 2344 III The State and the Support of Private Philanthropy 2346 IV Concluding Summary 2349 Footnotes 2350 Proposed Limitations on the Estate Tax Deduction for Charitable

Transfers David Westfall (1974) 2353 Introduction 2353

I Performance of Governmental Functions 2353 II Performance of Public Functions that Government Would

Not Undertake 2354 III Fairness to Transferors (or Their Beneficiaries) 2355

IV Incentive Effects 2355 Footnotes 2358

PartV

Alternatives to Tax Incentives

Alternative Approaches to Encouraging Philanthropic Activities Gerard

M. Brannon and James Strnad (1975) 2361 Introduction 2361

I A Classification of Alternative Approaches to

Encouraging Nonprofit Activities 2362 Education 2363 Medical Service Organizations 2363 Religious Organizations 2363

Welfare Activities 2364

Artistic Activities 2365 Basic Research Activities 2366 II Evaluation of Noncontribution Alternatives 2366 General 2366 Education 2368 Evidence of Overt Contributor Influences 2368 Evidence of Covert Influences 2370 Locality Effects 2372 Alternatives to Contribution Subsidies 2373 Medical Services Charities 2374

Aspects of the Present System of Tax Deductible Contribution Funded Health Charities 2374 Client Payment Subsidy Alternatives 2377 Alternatives to Contribution Subsidies for Medical

Research and Facilities 2378

Welfare Activities 2378

Relief to the Poor 2378

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Relief for Special Circumstances 2379 Disaster Relief . 2380 Supplemental Military Programs . 2380 Foreign Aid 2381 Arts 2381 Performing Arts . . 2381 The Plastic Arts 2381 III The Political Problem 2382 IV The Relative Costs of Alternative Arrangements to

Subsidize Nonprofit Activities . 2383 V In Lieu of a Conclusion . . 2385

Footnotes 2385

A Tax By Any Other Name: The Donor Directed Automatic Percentage Contribution Bonus, A Budget Alternative for Financing Governmental Support of Charity David A. Good and Aaron Wildavsky (1975) . . . 2389 I n t r o d u c t i o n 2389 I Budget Alternatives 2391 II Proposals, Criteria, and Consequences 2394 Tax Write-off 2396

The Tax Credit . . 2399

Percentage Contribution Bonus . . 2400 Sliding Matching Grant 2405 III What Difference Does the Government Subsidy Make?

A Sensitivity Analysis 2406 IV How Much of Which Problems Are We Prepared To Live With?

A Criteria Analysis 2407 Perspectives: Donors, Charitables, Government 2409 Trade-Offs . . . 2409 V Political Feasibility 2411 VI Testing the Percentage Contribution Bonus 2414 Footnotes 2415 Study of Federal Matching Grants for Charitable Contributions Paul R.

Me Daniel (1975) 2417 Summary 2417 I General Description of Matching Grant System 2418 Lifetime Gifts to Charity 2418 Testamentary Transfers to Charity 2419 II Analysis of Reasons For and Against Change From Tax

Deduction System to Direct Matching Grant System . . . 2420 Reasons for Change 2420

The Direct Matching Grant System Will Provide a More Equitable System of Expending Federal Funds for

Charity 2420

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Equity from a tax viewpoint 2420 Equity from an expenditure program viewpoint 2421 Equity under the direct matching grant system . . . 2425 The Direct Matching Grant System Will Enchance Pluralism

and the Dispersion of Power Over Federal Funds 2429 The Direct Matching Grant System is More Effectively

Targeted to Charitable Giving than the Income Tax

Deduction 2430 The Direct Matching Grant System Provides a More

Rational Framework Within Which to Determine

the Amount of Federal Aid of Charity 2431 The Direct Matching Grant System Will Provide an

Efficient Incentive to Donors to Give a Larger

Percent of Their Income to Charity 2434 General comments on efficiency as a factor in

evaluating the deduction and the matching

grant system 2435 Economists' views of the efficiency of the income

tax deduction 2435 Survey data • . • • 2442 Income elasticities 2443 Implications of studies for matching grant system . . . . 2444 Objections to Change and Responses Thereto 2445

The Direct Matching Grant Program Contains Its Own

Equity Problems 2445 The wealthy control too much of the federal funds . . . 2445 The notch effect 2447 The Use of a Ceiling on the Matching Grant System

Reduces the Effectiveness of the Proposal as an

Incentive 2448 The Proposed Direct Matching Grant System Will Involve

Too Much Federal Control Over Charitable Organizations. . 2449 Donors Will Reduce Their Giving to Charity Because of

Repeal of the Deduction 2449 Some Types of Charitable Institutions Will Suffer

Reductions in Funds Received Relative to Other

Kinds of Charitable Institutions 2450 The Direct Matching Grant System Creates Too Many

Administrative Problems To Be Feasible 2450 The Proposed Direct Matching System Is Unconstitutional

Because Direct Grants Would Be Made to Religious

Organizations 2450

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III Effects of Change On Donors 2450 Effect of Repeal of Deduction Alone on Private Giving 2450 General Effect of Repeal of Deduction Coupled With

Simultaneous Institution of Matching Grant System 2451 Estimates of Donor Responses Under Direct Matching

Grant System 2453 Progressive Matching Grant Schedule 2454 Flat Matching Grant Schedule 2458 Comparison of Progressive Matching Grant and

Flat Matching Grant 2458 Special Problem of Appreciated Property 2460 Conclusions as to Effect of Change on Donors 2462 IV Effects of Change On Donees 2462 Aggregate Effects on Charitable Organizations 2462 Effects on Particular Types of Charitable Organizations 2463 General 2463 Progressive Matching Grant 2467 Flat Matching Grant 2471 Comparison of Progressive Matching Grant and

Flat Matching Grant 2471 V Administration of Matching Grant System 2472 Definitional Problems 2472 Progressive Matching Grant Method 2472 Flat Matching Grant Method 2474 Bunched Contributions: Averaging Problems 2475 Reporting of Donations 2477 Progressive Matching Grant Method 2477 Flat Matching Grant Method 2478 Disbursement of Funds 2478 Audit 2479 Compliance 2480 Transition Rules 2480 Treatment of Tax Deduction Carryovers 2480 Gradual Implementation of Matching Grant System 2481 VI A Matching Grant In Lieu Of Estate and Gift Tax

Deductions For Contributions To Charity 2483 Introduction 2483 History and Present Structure of the Estate and Gift

Tax Provisions 2483 The Function of the Charitable Deduction in the

Estate and Gift Tax System 2484 Reasons For and Against Changes in the Present System 2485 Tax Equity 2485 Equity as an Expenditure Program 2485 Rationality of Appropriations Process 2487

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Page Efficiency of the Estate Tax Deduction for

Charitable Bequests 2487 Proposal For a Matching Grant System 2488 Progressive Matching Grant 2488 Flat Matching Grant 2489

Gift Tax Aspects 2489

Effects of Introduction of the Matching Grant Proposal 2489 Equity Aspects 2489 Impact on Donors and Donees 2490 Special Problems in the Estate and Gift Tax Matching

Grant System 2491 Relative Incentive for Lifetime versus Death-Time

Giving 2491 Treatment of Transfers Subject to Both the

Gift and the Estate Tax 2491 VII Federal Financial Aid To Charity: Constitutional Issues 2492 Introduction 2492 Historical Background 2492 The Supreme Court's Tests in First Amendment

Religion Cases 2494 Tax Expenditures versus Direct Expenditures: Are the

Constitutional Tests the Same? 2496 Functional Equivalence 2496 Constitutional Arguments Based on the Function of the

Charitable Deduction in the Federal Income Tax System . . 2500 Traditional analysis of the charitable deduction

as a tax expenditure or tax incentive 2500 Minority view of deduction 2502 Conclusion 2503 The Constitutional Status of Direct Federal Financial Aid to

Charitable Organizations, Including Religious Institutions . . . . 2503 Secular Legislative Purpose 2504 Primary Effect 2505 Excessive Entanglement With Religion 2508 Conclusion 2511 Appendix A: Note on Economic Theories of Sacrifice 2511 Appendix B: Note on Refundable Tax Credit 2513 Footnotes 2514

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Part VI