Diane Kennedy
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- Aug 31, 2007
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Great info .... so if the trust sells the ball for $1m then proceeds to buy an apartment building which cash flows $5K/mo, he gets $5K/mo taxable at his marginal rates -- but what is his charity deduction in aggregate? $1m? Is that amortized over a X period of time from year to year?
The charitable remainder trust is a great way to handle appreciated property sales. So, if the ball sells for $1 m, the entire $1 m gets invested. I'd hope for closer to $8K per month cash flow since you'd likely be free and clear on the building. At any rate, yes, that all can be distributed to you. You get a charitable deduction based on the value of the ball. There is one catch though - your charitable donation each year is most likely limited (unless you have a bunch other income) to the amount of your income and it can only roll forward for 5 years.
But contrast that with Plan B: Sell the ball and assume you'll pay capital gains tax, only to find out it's really AMT - so write a check for $280,000, leaving you $720,000 left over to invest with.
Plan A: Charitable Remainder Trust $1 mill invested at 10%, $8,000 per month + charitable donation deduction for first 5 years.
Plan B: $720,000 invested at 10%, $6,000 per month, fully taxable
There is a downside - you have removed an asset from your estate. In Plan B, your heirs could inherit whatever is left when you die. In Plan A, a charity receives what's left when you die (hence the name Charitable "Remainder")
On your personal tax stuff - sorry about that. I've been thinking about your situation after reading your SUCCESS STORY. I'm guessing you have a lot of IP, which for the future could be used in a good tax strategy. I'll think about it and start a thread maybe this weekend on using IP to pay less tax.
BTW I still haven't done my personal returns for 2006. So, if anyone is freaking out about not doing theirs yet...just know that all the CPAs usually file at the 11th hour. Less chance of audit.