Charitable Remainder Trust Pays No Gains Tax Upon Sale???
A little long so please bare with me....
I just read of a technique where you can do the following....(from the book "Die Broke".
Say you have a $1,000,000 house you want to sell and made gains of $500k. You create a charitable living trust, and give the property to the trust. The trust must be setup that when you die, any remaining money goes to a charity.
You then sell the house while within the trust, and then tell the trust to pay you 5%-7% per year by investing the money (bonds, notes?) from the sale of the house which will be the entire $1 MM because no tax was paid on gains. As a rough estimate, you would have paid 200K or more in taxes WITHOUT the trust, so you would have 800K instead of the full 1MM to invest. The 1MM sounds better to me.
Additionally, you are supposed to receive a tax break from the IRS since the assest is given to a charity when you die, based on some kind of IRS actuarial tables.
I guess they look at it as an income generating standpoint. You can live better off the interest of 1MM than 800K. But then again when no do a 1031 instead and keep it in real estate? <IMG SRC="images/forum/smilies/icon_wink.gif">
Has anyone done this or heard of someone doing this effectively? Or is it worth it.
[ Edited by ddhamilt on Date 12/14/2003 ]
I just read this:
http://www.thecreativeinvestor.com/modules.php?name=News&file=article&sid=395
Input capital gains under the search box above and you will come up with a few articles.
By putting a property in a CRT, do transfer taxes apply and increased basis?