Sunday, January 07, 2024

MisFortune and Tax reasons: How a Former IRS Boss Optimizes His Charitable Trust to Support His Alma Mater–and Give Assets to His Children Tax-Free

Fortune, How a Former IRS Boss Optimizes His Charitable Trust to Support His Alma Mater–and Give Assets to His Children Tax-Free:

John Koskinen’s phone has been ringing a lot these days. The 84-year-old former IRS Commissioner known as “Mr. Fix-It” may be retired, but he sits on the board of three non-profit organizations, is an advisor to two startups, plays tennis several times a week, remains an avid theatergoer, enjoys time with his family, and still prioritizes interviews about everything from IRS controversy to charitable trust strategy innovations. 

Koskinen’s humility (“I’m not sure anyone else wanted the job,” he says of his four-year post at the IRS under President Obama) belies an extraordinary professional trajectory and ongoing influence in both public and private sectors. With a career spanning federal judge clerkship, law practice, political campaign management, turning around failing enterprises, and political appointments by Presidents Clinton, Bush, and Obama, Mr. Fix-It’s clear-sightedness has a far-reaching impact. 

Yet of all these accomplishments, it’s the endowment he set up for his alma mater, Duke University, using a charity lead annuity trust (CLAT) that’s offered the most enduring fulfillment.

After graduating from Duke with a degree in Physics in 1961, Koskinen set out to Yale School of Law. ...  Thirty-seven years later—inspired by his years at Duke, keen human interest, and desire to preserve his children’s inheritance—Koskinen set up a charity lead annuity trust to benefit the university. 

While endowment programs have long sought out generous contributions from donors, Koskinen was ahead of his time in using a CLAT to provide exponential yearly benefits to both donor and institution. 

Koskinen’s CLAT used the appreciation from his invested stocks to fund athletic scholarships and to build a 4,500-seat, state-of-the-art lacrosse and soccer stadium (that now carries his name) at Duke. These projects helped elevate the university’s sports program to national prominence.

Koskinen Stadium Duke 2

Koskinen’s leadership demonstrated the CLAT’s power as one of the most robust estate planning tools available for both philanthropy and generational wealth creation.

Endowment programs are increasingly turning to CLATs because they provide a way to support the institution while also granting big tax benefits to their donors. By setting up a CLAT, donors are able to make a charitable donation and receive an immediate income tax deduction of up to 30% of their adjusted gross income. 

Koskinen, who arguably knows the tax code better than anyone, asserts his CLAT worked out perfectly and he would choose the same strategy again in today’s economy, “without a doubt,” (as opposed to a gift trust or other trust model). ... 

Knowing his children were taken care of financially through the CLAT allowed Koskinen to focus on public service and passion projects later in his life

Steven Chung (Tax Attorney, Los Angeles), Was Jesus Born In Bethlehem For Tax Reasons?:

Chapter 2 of the Gospel of Luke states that Caesar Augustus issued a decree that the world should be taxed based on their ancestral lineage. So Jozef and Mary traveled from Nazareth to Bethlehem because Joseph was descended from King David. There, Mary gave birth to Jesus in a manger.

This implies that Jesus was born in Bethlehem for tax purposes. But is this accurate?

The word tax was used only in the King James Bible. ... Modern versions of the Bible state that instead of a tax, Caesar Augustus either decreed a census of the Roman world (New International Version), everyone must be “enrolled” (American Standard Version), or that everyone must be registered (English Standard Version). 

While these suggest that Caesar Augustus wanted to count the number of his subjects, information from a census was also used for tax purposes at the time.

A number of modern scholars claim that the census — formally known as the Census of Quirinius — took place in 6 CE which is around 10 years after the historically accepted birth year of Jesus. Most have acknowledged that Luke could have been wrong; others have provided explanations for the discrepancy.

Assuming a census existed at the time of Jesus’s birth, how would it help with taxation? The Roman Empire’s tax revenue mainly came from property taxes, poll taxes, tribute from conquered lands, and various sales taxes and duties from ships. 

There was a wealth tax of 1% (3% during war) on the value of all assets. There was an income tax, but that was only imposed on government monopolies, not individuals.

It is not clear as to what information had to be disclosed in the census. If only the bare minimum was needed, then the census was probably useful for poll tax purposes while a thorough disclosure of financial information suggests it would be used for income or wealth taxes. Places with high population density or high levels of commerce could be studied further by the government to determine whether additional taxes are appropriate. ...

So was Jesus born in Bethlehem for tax purposes? It depends on where your own research takes you