Charitable remainder annuity trust example
Larry and Sue, both 74, would like more spendable cash now that they are retired. They are considering liquidating some stock that pays no dividends and reinvesting the proceeds for additional income. The bought the stock, now worth $200,000, several years ago for $20,000.
They decide to use their stock to create a charitable remainder annuity trust that will pay them 6.25% percent of the stocks value or $12,500 each year as long as either of them lives. They do not have to recognize any of their $180,000 paper gain in the stock, and they get an income tax deduction of $63,034.
| Fair Market Value |
$200,000 |
| Basis |
$ 20,000 |
| Debt |
$ 0 |
| Capital gain |
$180,000 |
| Capital gains tax rate |
15% Federal + 9% Oregon = 23% |
| Potential capital gains tax (if property sold) |
$ 41,400 |
| Value of asset to trust |
$200,000 |
| Type of instrument |
Charitable Remainder Annuity Trust |
| Term of instrument |
Donors' Lives |
| Tax deduction |
$ 63,034 |
| Annual payout - fixed income |
$ 12,500 |
