Proposal: Five friends in this situation write $10k checks[1] to a sixth. They all have a long chat about their altruist values and beliefs. The sixth donates $60k to a variety of EA causes.
Question: Just how likely / unpleasant would the ensuing IRS audit be?
(There’s also a micro-donor-lottery version of this, except the individual contributions are personal gifts and the full $60k is a charitable donation.)
[1] Actually, you want this to be something like $7k, since the tax deduction from donating is worth [your marginal income tax rate] on the amount, roughly 30%. Formally, $10k less the tax benefits from donating $10k.
This ‘works’ except for the fact that any sort of enforceable contract (that, in year 6, it will eventually get around to you) will mean they are no longer gifts (and thus aren’t considered personal gifts underneath the relevant threshold). But even if it doesn’t get around to you, this is an improvement over not having anything to deduct yourself.
I also think that if the “sixth friend” donates $10k in line with each other friend’s values and beliefs (as a result of social expectation, not contract), then there’s no particular benefit to being the one who has to handle the money, and you don’t need to trust in multi-year commitments.
Why not instead: The $10k/year donor instead writes the $10k check to a friend who is already planning on itemizing that year and that friend then donates an amount equal to ($10k + the additional tax benefit they receive) such that that friend’s after-tax income is the same.
Your suggestion is correct, though it seemed too messy (and nonessential) to explain for the sake of an off-the-cuff proposal. I added a footnote to clarify this above, though.
Proposal: Five friends in this situation write $10k checks[1] to a sixth. They all have a long chat about their altruist values and beliefs. The sixth donates $60k to a variety of EA causes.
Question: Just how likely / unpleasant would the ensuing IRS audit be?
(There’s also a micro-donor-lottery version of this, except the individual contributions are personal gifts and the full $60k is a charitable donation.)
[1] Actually, you want this to be something like $7k, since the tax deduction from donating is worth [your marginal income tax rate] on the amount, roughly 30%. Formally, $10k less the tax benefits from donating $10k.
This ‘works’ except for the fact that any sort of enforceable contract (that, in year 6, it will eventually get around to you) will mean they are no longer gifts (and thus aren’t considered personal gifts underneath the relevant threshold). But even if it doesn’t get around to you, this is an improvement over not having anything to deduct yourself.
On the other hand, the social expectation of “I gave to you in your year, you can’t back out now!” is a strong commitment device.
I also think that if the “sixth friend” donates $10k in line with each other friend’s values and beliefs (as a result of social expectation, not contract), then there’s no particular benefit to being the one who has to handle the money, and you don’t need to trust in multi-year commitments.
Why not instead: The $10k/year donor instead writes the $10k check to a friend who is already planning on itemizing that year and that friend then donates an amount equal to ($10k + the additional tax benefit they receive) such that that friend’s after-tax income is the same.
Your suggestion is correct, though it seemed too messy (and nonessential) to explain for the sake of an off-the-cuff proposal. I added a footnote to clarify this above, though.