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CHARITABLE GIFT ANNUITIESThere are several exceptions to the scope of the definition of the term acquisitionindebtedness. One of these exceptions is that the term does not include anobligation to pay an annuity that is• the sole consideration issued in exchange for property if, at the time of theexchange, the value of the annuity is less than 90 percent of the value ofthe property received in the exchange,• payable over the life of one individual who is living at the time the annuityis issued, or over the lives of two individuals living at that time, and• payable under a contract that does not guarantee a minimum amount ofpayments or specify a maximum amount of payments and does not providefor any adjustment of the amount of the annuity payments by referenceto the income received from the transferred property or any otherproperty. 31Consequently, charitable gift annuity contracts that are properly writtenadhere to these elements, to avoid adverse tax consequences to the issuing charity.That is, if the criteria are not met, the increase generated from the investmentof the proceeds will be a form of unrelated debt-financed income subject to taxas unrelated business income.§ 14.7 CONTRAST WITH OTHER PLANNED GIFT METHODSBecause the arrangement creating a charitable gift annuity is a contract betweendonor and donee, all of the assets of the charitable organization are subject to theliability for ongoing payment of the annuities. (By contrast, with most plannedgiving techniques, the resources for payment of income are confined to those in asplit-interest trust.) That is why some states impose a requirement that charitiesestablish a reserve for the payment of gift annuities, and why many charitableorganizations are reluctant to embark upon a gift annuity program. However,charitable organizations that are reluctant to commit to the ongoing payment ofannuities can eliminate the risk by reinsuring them.As a consequence of the unrelated debt-financed income rules, 32 the term ofan income interest in a charitable gift annuity arrangement is one or two lifetimes.This is similar to the rules in the case of pooled income funds. 33 By contrast,income interests resulting from the creation of a charitable remainder trustcan be for a term of years. 34With the charitable gift annuity, the gift portion of the transaction is immediatelyavailable for use by recipient charitable organization.§ 14.8 GIFT ANNUITIES AND ANTITRUST LAWSThe antitrust laws were amended in 1995 to make it clear that charitableorganizations using the same annuity rate in the issuance of charitable gift31 IRC § 514(c)(5).32 See § 14.6.33 See § 13.2(b).34 See §§ 12.2(f), 12.3(f). 502