Tax Court Limits Charitable Deduction For Estate

When Eileen Belmont died, the bulk of her estate was left to charity including a post-death cash distribution from her retirement plan. But a legal challenge by her brother caused the money to be used to defend the will but after the estate claimed a charitable tax deduction on the amount.

In Estate of Belmont v. Commissioner, the Tax Court denied the deduction because the amount had not been permanently set aside for future distribution to the charity. To be considered permanently set aside, the court stated, the possibility the money would not go to the charity must be “so remote as to be negligible.”  Since there were many indicators the money would be required to fend off the brother’s challenge the estate should have known the set aside would not be permanent and waited to make the deduction until a later taxable year.

See Jillian Merns, Estate Loses Out On Charitable Deduction, Wealth Management, March 16, 2015.

Special thanks to Jim Hillhouse for bringing this article to my attention.