Mr. & Mrs. Jones, ages 65 and 63, need more income in retirement. They hold 1,000 shares of XYZ Corp., purchased many years ago for $5 per share. The stock now sells for $50 per share, but pays an annual dividend of only $0.50 per share, providing annual income of $500. If they were to sell the stock to reinvest for higher income, they would owe $6,750 in Federal income taxes at 15 percent (and additional state taxes if applicable) on their $45,000 capital gain. This would leave them $43,250 (or less) to reinvest.

If instead if selling the XYZ shares, Mr. & Mrs. Jones donate the stock to AIER's Reserved Life Income Fund, the entire $50,000 could be reinvested and they would receive a Federal income tax deduction in the year that their charitable gift is made. The amount of their deduction depends on the number of persons they name as income beneficiaries, their ages at the time of the gift, and the historical rate of return paid out by the Fund. The deduction is for the estimated present value of AIER's remainder interest, based on the expected lives of the income beneficiaries, discounted at the historical rate of return paid out by the Fund. If the gift were made this year and the income beneficiaries included only Mr. & Mrs. Jones, their deduction would be $20,553.

If Mr. & Mrs. Jones also named their two children, ages 44 and 40 as second tier income beneficiaries, their deduction would be $11,824.

If they added five grandchildren, ages 18, 16, 12, 11, and 4, as third tier income beneficiaries, the deduction would be roughly $4,268. In this instance, the Jones' heirs would receive the income generated from the $50,000 gift to AIER for possibly several decades.