from Medieval Academy News (Winter 2003)

Timely help from some Hall-of-Famers—and an appeal
by David Anderson

October is the month in which the Medieval Academy sets its annual budget, and the picture presenting itself to the Finance Committee this year, as always, is dominated by the fact that about half of our operating cash derives from a “draw” on the endowment. To be more precise, 47.04% of the Academy’s disbursements in 2002 and 50.62% of its disbursements budgeted for 2003 were paid for by interest and dividend income from, or appreciation of, our investment portfolio.

Always eager to reduce our dependence on the “draw” in planning for the future, we were especially pleased when, just last month, the Academy received a burst of donations that will provide some income on a yearly basis. The nature of the benefaction was also interesting: a number of the authors—and heirs of authors—of volumes in the Medieval Academy Reprints for Teaching (MART) series donated their royalty rights to the Academy. There was a double gain from this: the Academy received a meaningful, continuing gift from some of its venerable elders at a time when its finances are strained; and the venerable elders or their heirs received a significant one-time tax deduction.

I write this report in the earnest hope that readers will consider making such a donation—and not just of royalties from MART but from other books, too. This is how it works: the owner of the rights to royalties assigns them to the Medieval Academy, and the Academy receives all future royalty payments. Since the Academy is a qualified organization under Section 1.170c of the Internal Revenue Code, contributions to it may be taken as deductions on individual and business income tax returns.

Based on information about past sales of the book and its outlook for future sales, the Medieval Academy will provide a professional valuation establishing the worth of the charitable gift. The Academy will also provide a completed IRS Form 8283 to attach to the donor’s tax return.

Calculating the size of the gift depends on several factors, including prevailing interest rates. The current, low-interest-rate environment has a favorable effect on the valuation of future royalties; that is, it increases the value. For example, one gift by a MART author, with a royalty stream expected to decline slowly from $140 per year over twenty years, was appraised recently for purposes of a tax deduction in the range of $1,200 to $1,300.

The donor receives (in addition to the honor and satisfaction of making the gift), a one-time tax deduction. In our example, if the donor is in a 35% tax bracket, the deduction would save about $437 in 2003 taxes ($1,250 x 0.35). This is a significant savings in comparison to the relatively small annual income from royalties, which is taxable, of course.

On behalf of the Finance Committee, I ask members to consider making a donation of royalties in this way. If you have questions about the process and what the tax deduction might be, please call me (585-739-7222) or Rick Emmerson, the Executive Director, at the Academy office (617-491-1622).