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| A $2 MILLION GAIN ... AND NO CAPITAL GAINS TAX SOURCE: RECER EXPERIENCE. On the day he retired from one of America's largest chicken processors, the President of the firm and his wife came to see me to plan their estate. He said, "One of the biggest problems we have is the great appreciation in our company stock." He went on, "Today, it is worth about a $3 million ... and, over the years, we paid only about $1 million." "So, what's the problem," I asked. "Well," he continued, "you see, the company has a policy that I must sell all my stock back to the company within six months of retirement ... so, I am facing a forced sale of the stock ... and a state and federal capital gains tax of about $700,000." The lady pushed some papers toward me and said, "We have been working with our accounting firm ... and they tell us there is no way to avoid this tax." Recognizing the name of the accounting firm as one of the top five in the country, I asked, "Did any of the firm's people tell you about the Charitable Remainder Trust?" They both shook their heads ... negative. I proceeded to show them how to transfer the stock to a charitable remainder trust, to let the trust sell it and to pay no capital gains tax. By using this procedure, they would have a lifetime stream of income from the entire $3 million and would avoid the payment of $700,000.00 in capital gains tax. "If this is true, why didn't our accounting firm tell us," they asked. "Unfortunately, I don't know the answer to your question," I replied. "But, I suggest you take my idea back to them and, in concert with your attorney, take a hard look at the charitable trust as a means of tax avoidance." See also, Capital Gains Tax: Basic Concepts See also, Capital Gains Tax: Advanced Concepts |
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