Kim and Robert purchased stock in a community bank several years ago. The
bank has done well. A regional bank is now discussing the possibility of
buying the community bank. Kim and Robert are looking for a way to save
Kim: We were fortunate to invest in the community bank. We thought this stock would grow and, indeed, it has increased in value.
We paid about $50,000 for the stock and it is now worth $400,000. If we
were to sell the stock, we would pay a large tax.
It looks like the community bank may be sold to a regional bank. There is no sale agreement yet, but it could happen in the near future.
Robert: We have always talked about taking part of that stock value and buying a cabin on Caney Lake. I have found a very nice cabin there with an outstanding view. The price is going to be approximately $120,000.
Kim: So how can we take $120,000 in cash from the value of the stock and not pay tax? We checked with our CPA. He suggested that we talk to a gift planner at the University of Louisiana Monroe Foundation. We were happy to discover that we could transfer $280,000 worth of the stock into a special trust called a charitable remainder unitrust. When we transfer the stock into that trust, it can then be sold tax free.
Robert: Best of all, we were able to sell the other $120,000 of the stock for cash. The deduction on the charitable trust saved enough in tax so that we did not have to pay tax on the $120,000. The full $120,000 was available and we could purchase our cabin on the lake.
Kim: This was a wonderful arrangement. I am pleased that we were able to set up the unitrust. We now have income and are enjoying our lake cabin.