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Pooled Income Funds

The Pooled Income Fund (PIF) is similar to the CGA in that a gift is made in return for a stream of income. Unlike a CGA, where the income stream is based upon a fixed rate, the PIF income stream is based upon investment results. Here's how a PIF works:

  • Similar to a CGA, you deal directly with the charity of your choice.
  • The PIF is a trust created and managed by the charity.
  • The donation to the charity is held in the trust with all other donations made by other donors like yourself who entered into the PIF with the charity.
  • Upon making the donation, you receive a certain number of “units of
    participation” from the trust.
  • Unlike the CRT and the CGA, all of the income stream paid to you by the PIF is treated and taxed as ordinary income.

Typically, a PIF is used when you want to deal only with a particular charitable organization.

  • The biggest downside to contributing to a PIF is the fact that you're relying on the charity's investment management of the pooled contributions and market conditions to achieve a reasonable amount of income to enable it to fulfill its promise to pay its donors.

The amount of the income tax charitable deduction is the present value of the charity's remainder interest, like a CRT, subject to the AGI limits previously described.