A donor managed investment account (or DMI account) is a charitable giving mechanism in which donors receive a full

tax deduction Tax deduction is a reduction of income that is able to be taxed and is commonly a result of expenses, particularly those incurred to produce additional income. Tax deductions are a form of tax incentives, along with exemptions and tax credits. T ...

at the time they fund the DMI account, but retain

investment management Investment management is the professional asset management of various securities, including shareholdings, bonds, and other assets, such as real estate, to meet specified investment goals for the benefit of investors. Investors may be institut ...

rights over the account, and can request donations from the account to charities. By offering investment autonomy, the DMI account method is designed to appeal to donors who want to actively participate in the philanthropic support of a favorite charity. Donors using a DMI account to manage their gifts to qualified charities receive an upfront

federal income tax Income taxes in the United States are imposed by the federal government, and most states. The income taxes are determined by applying a tax rate, which may increase as income increases, to taxable income, which is the total income less allow ...

and

gift tax In economics, a gift tax is the tax on money or property that one living person or corporate entity gives to another. A gift tax is a type of transfer tax that is imposed when someone gives something of value to someone else. The transfer must ...

deduction for up to 50 percent of their adjusted gross income, and can actively invest the assets (independently or through a financial manager) in various

investment vehicle An investment fund is a way of investing money alongside other investors in order to benefit from the inherent advantages of working as part of a group such as reducing the risks of the investment by a significant percentage. These advantages inc ...

s, including

hedge fund A hedge fund is a pooled investment fund that trades in relatively liquid assets and is able to make extensive use of more complex trading, portfolio-construction, and risk management techniques in an attempt to improve performance, such as sho ...

private equity In the field of finance, the term private equity (PE) refers to investment funds, usually limited partnerships (LP), which buy and restructure financially weak companies that produce goods and provide services. A private-equity fund is both a ty ...

and

real estate Real estate is property consisting of land and the buildings on it, along with its natural resources such as crops, minerals or water; immovable property of this nature; an interest vested in this (also) an item of real property, (more general ...

. The technique was developed in 2003 by Winklevoss LLC, a financial consulting firm based in

Greenwich, Connecticut Greenwich (, ) is a New England town, town in southwestern Fairfield County, Connecticut, United States. At the 2020 United States Census, 2020 census, the town had a total population of 63,518. The largest town on Connecticut's Gold Coast (Conne ...

. In July 2004, the firm received a favorable

private letter ruling Private letter rulings (PLRs), in the United States, are written decisions by the Internal Revenue Service (IRS) in response to taxpayer requests for guidance. A letter ruling is "a written statement issued to a taxpayer by an Associate Chief Counse ...

from the U.S.

Internal Revenue Service The Internal Revenue Service (IRS) is the revenue service for the United States federal government, which is responsible for collecting U.S. federal taxes and administering the Internal Revenue Code, the main body of the federal statutory ta ...

that effectively confirmed the tax-deductibility (for federal income and gift-tax purposes) of donor’s gifts that are managed in a DMI account. Since the charity that offers the DMI account owns the donated funds outright from the time of their receipt, funds are managed in a tax-free environment, and can potentially result in a larger gift to the organization than the initial contribution. Charities can offer this method to encourage incremental gifts from investment-oriented donors, while fostering relationships between giver and recipient. Saturday, 12 June 2021

References

{{reflist Investment management Financial capital

See also

References