Text Resize

Tax-Free Sale

Tax-Free Sale
Molly and Phil were both 55 when they purchased some development 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.

Phil: 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.

Molly: 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 Molly and Phil can use a special trust to receive three very nice benefits. The benefits are:

  • Bypass capital gain
  • Increase income
  • Charitable deduction

Phil: We are delighted with our special trust called a 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!

Molly: 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 a great benefit of the plan, but my favorite part is that when Phil and I pass away, the balance in the trust will be used to establish a Perpetual Annual Campaign Endowment (PACE) fund in our names at our local Federation. We have lived, thrived and raised our family in this community. Our PACE fund will help the Jewish community to remain vibrant and strong. Our PACE fund will help feed the hungry, support the unemployed and address the most pressing issues facing the community into the future.

* Please note: The names and image above are representative of typical donors and may or may not be actual donors to The Jewish Federations of North America, a Jewish Federation or a Jewish Community Foundation. Since your unitrust benefits under federal rules may be different from this couple, you may want to click here to view a color example of your benefits.

scriptsknown

Any tax consequences described on this page are based on U.S. federal tax law. Charitable deductions from state and local taxes or from Canadian and provincial taxes may not be available to the same extent as from U.S. federal taxes. The Jewish Federations of North America (JFNA) does not provide legal advice. Donors are encouraged to seek independent tax and legal counsel. You may read JFNA's charitable solicitation disclosure statement here and important information about endowment gifts and bequests to JFNA here.