IRA Rollover Provision

An option to make gifts from your IRA without incurring a penalty in 2006 and 2007

Recent legislation offers a new opportunity to those:

• Age 701/2 or older and
• Own an IRA.

The new law, entitled Pension Protection Act of 2006, allows these IRA owners to make distributions directly from their IRA to one or more charities without the distributions being included in taxable income and subject to withholding.

Previously, if you wanted to use IRA funds for a charitable contribution, you had to withdraw money from your IRA and then contribute it. The amount you withdrew was taxable, and the deduction for the contribution may or may not have offset the tax.

Another benefit of the new legislation is that the funds transferred from your IRA to a charity count towards your mandatory withdrawal.

Example: Suppose Mary has $700,000 in an IRA and will be required to withdraw approximately $35,000 this year, and suppose further that Mary wants to contribute $10,000 to Graceland. She can authorize the company investing her IRA to transfer $10,000 to Graceland and $25,000 to herself. The $10,000 distributed to Graceland University will not be subject to tax, but does count towards her required withdrawal.

Making charitable contributions from an IRA rather than other assets will be especially appropriate for those who:

• Do not itemize deductions
• Would not be able to deduct all of their charitable contributions because of deduction limitations
• May lose some of their itemized deductions because of their income level, or
• Are required to take distributions but do not need them for living expenses.


This new law allows distributions to universities to be either undesignated or directed to a specific endowed scholarship or Graceland's General Endowment.

Certain limitations apply to these non-taxable charitable distributions from an IRA:

• They cannot exceed $100,000 per year per spouse
• They must be made to a public charity. Gifts to Graceland qualify!
• The gifts must be outright; for instance, they cannot be used to establish a gift annuity or fund a charitable remainder trust
• These tax-free distributions can only be made in 2006 and 2007.

If you have questions or would like to talk about this option further, call the Development Office, Graceland University, 1.800.645.3582.