S15. What are loanbacks and how do they work?
In the context of charitable giving and taxation, a loanback occurs when a donor makes a gift to a qualified donee and within 60 months of making the gift, at least one of the following two situations occur. These situations have the effect of reducing the fair market value of the gift for income tax purposes.
- The qualified donee holds a non-qualifying security of the donor that it acquired after the time that is 60 months before the gift was made.
- The donor (or a person or partnership not dealing at arm's length with the donor) uses the qualified donee's property under an agreement that was made or modified after the time that is 60 months before the gift was made; and
- The property was not used by the qualified donee in its charitable activities.
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