A 68-year-old investor avoids $480,000 in taxes by using a charitable remainder trust to diversify a $2.4 million concentrated stock position.
A 68-year-old retiree with a $2.4 million single-stock position and a $180,000 cost basis faces a $2.22 million embedded capital gain, triggering roughly $640,000 in federal, state, and net investment income taxes if sold outright. The tax bill would leave only $1.76 million for reinvestment.
A charitable remainder unitrust (CRUT) allows the holder to transfer appreciated shares tax-free, deferring capital gains taxes while generating an income tax deduction. The strategy also provides annual retirement income, though the principal becomes irrevocable once contributed to the trust.
The approach is governed by IRC Section 664 and is frequently discussed among investors seeking to diversify concentrated positions without incurring large tax liabilities. The retiree plans to allocate remaining assets to her alma mater and a community foundation.