A $900,000 REALIZED GAIN ... AND NO CAPITAL GAINS TAX

In Baltimore, we serve as consultants to a large hospital system and we conduct many estate planning seminars for them.

One man attended the seminar ... and, later, came in for a personal estate planning session.

He explained that he owned a tract of land near the Pennsylvania border on Interstate 83 and that he was prepared to sell it and to invest the proceeds in a certain bond that he liked and that would pay him and his wife a retirement income.

"But," he said, "I am going to pay a lot of capital gains tax."

When we questioned him, he went on, "I have no tax basis in the land and I plan to sell for $900,000. So, I will have state and federal capital gains tax of almost an even $300,000."

He went on to explain that he intended to invest the remaining $600,000 in the bond and that he expected to receive an income of about $42,000 per year.

We introduced him to the Charitable Remainder Trust and pointed out that he would pay no capital gains tax if he transferred the asset to the trust and the trust sold it. We further explained that the couple would have an income of about $63,000 per year for their two lives.

"Then the asset goes to the hospital?" he questioned.

"That's exactly right," we concluded.

After a pause, he said, "You know, it's about time that my wife and I did something for this hospital. I have been in here twice and she has been in here once. They took excellent care of us and we have never done anything for the institution."

Then, he concluded, "Write down those numbers. I am going to take this idea to my attorney and have him write it up."