Howard and Lynn were age 55 when they purchased some land outside of town. They thought it would be a good investment that they could later sell for a higher price.
Over the years, development from town has moved toward the property and their land is now next to a large commercial store. They now rent the property to the commercial store for overflow parking.
Howard: We have owned this property for over 10 years. It has been a good investment and increased in value. We have received just enough rental income in the last few years to pay the taxes. However, we now would like to sell.
Lynn: It would be nice if we could sell without paying a large tax. Our tax advisor has told us that if we were to sell, there would be a large capital gains tax. We also could use some tax deductions this year.
The good news is that Howard and Lynn were able to create a special trust called a charitable remainder unitrust and receive three very nice benefits.
- Bypass capital gain
- Increase income
- Charitable deduction
Howard: We are delighted with our unitrust. With our unitrust, we saved about $36,000 in capital gains tax and almost $18,000 in income taxes. That is over $54,000 in tax savings!
Lynn: Plus, we increased our income. The land was producing almost no income before. Now, we receive over $12,000 in income each year. This increased income is one of my favorite parts of the plan.
*Please note: The name and image above is representative of a typical donor and may or may not be an actual donor to their favorite charity. Since your unitrust benefits may be different, you may want to click here to view a color example of your benefits.