Glossary of Terms beginning with F

The price at which property will change hands between a willing buyer and a willing seller, neither being under compulsion to buy or sell, and both having a reasonable knowledge of relevant facts.

The tax imposed on the transfer of property by a decedent to others at the decedent’s death. This tax is paid from the assets includible in the decedent’s estate for estate tax purposes.

The tax imposed on the transfer of property during the lifetime of the donor. This tax is typically paid by the donor.

The federal tax on an individual’s income.

A person or organization who manages the assets of a trust or fund for the benefit of others.

The normal default for determining basis is FIFO, which is typically chosen for taxation purposes. Let's say a donor is making a gift of mutual fund shares to your organization. Using the FIFO method of valuation, he or she is able to use the price of the first shares purchased to establish the cost basis of all the gifted shares. First in, first out.

A federal income tax provision that permits a donor to carry over into the five succeeding tax years the amount of an income tax deduction for a gift to a charity that exceeds the deductible amount in the year the gift is made.

 A variation of the deferred charitable gift annuity. A flexible deferred gift annuity allows the donor to specify a period of time in which the donor will choose to begin receiving annuity payments. The charitable deduction is based on the earliest payment start date.

In a "flip CRUT", the donor establishes a net income CRUT, typically with illiquid assets. After a specific future event, such as sale of the assets, death, or a particular attained age of the donor, the trust is converted to a standard CRUT, paying out a fixed percentage distribution of market value of the trust assets, until the trust terminates.

The U.S. Individual Tax Return Form on which an individual U.S. citizen reports factors relating to their personal taxes such as income, various deductions, capital gains and losses, and dividend and interest income.

The form on which distributions from a taxpayer’s annuities, retirement plans, pensions, etc. are reported. This form is sent by the plan custodian to the owner and is included with that individuals 1040 form.

The Split Interest Trust Information Return Form is used to report the financial activity of a charitable remainder annuity trust or unitrust.

The IRS Form 990 is titled “Return of Organization Exempt from Income Tax.” It is submitted by the tax-exempt organizations and non-profit organizations to provide the Internal Revenue Service with annual financial information. A short version, Form 990-EZ, may be used by organizations with gross receipts of less than $100,000 and total assets of less than $250,000. Another variant, Form 990-PF, is available for private foundation organizations. The Form 990 provides the public with financial information about a given organization and is often the only source of such information. It is also used by government agencies to prevent organizations from abusing their tax-exempt status.

Do not confuse ‘fractional gifts’ with ‘undivided fractional gifts’. Fractional gifts generally not tax wise. A fractional gift is giving 1/10th of a piece of art but keeping the rights to reproduce.

The ownership of some, but not all, of an asset. Remember, a fractional interest may make a great gift.

Future value measures the nominal future sum of money that a given sum of money is “worth” at a specified time in the future assuming a certain interest rate. For example, $1,000 has a future value of $1,120 in one year, assuming an annual return of 12%.