Why is a portion of a gift annuitys payment tax-free?
When you give an asset to Whitman College to fund a gift annuity, we will ask for the basis of the asset you are transferring. The basis is the amount you paid for the asset you are donating. When payments are made to you, it is assumed a portion of the payment is a return of the asset basis. As a return of basis is not taxable, that part of your payment is tax-free. The higher your basis in an asset the larger the amount of tax-free return of basis you will have with each payment.
