Land is not the only asset you can contribute to a Charitable Remainder Trust. Livestock, crops, machinery and equipment can also be contributed.
Sale Of Calves And Crops
Proceeds from the sale of calves and crops are treated as ordinary income and incur self-employment tax (Social Security tax and Medicare tax). The same calves and crops sold in a CRT will defer the income tax and avoid the self-employment taxes otherwise due on the sale. This allows the full proceeds from the sale of the calves and crops to be invested inside the CRT to generate lifetime income for the donors. Contribution of calves and crops to a CRT generally does not generate a charitable income tax to the donor.
Sale Of Cows
Breeding livestock such as cows are capital assets and incur capital gains tax on sale. The same cows sold in a CRT will avoid or defer this tax. This allows the full proceeds from the sale of the cows to be invested inside the CRT to generate lifetime income for the donors. Contribution of cows generates a charitable deduction based on the donor’s basis in them.
Sale Of Equipment
The recapture of depreciation on the sale of machinery, equipment or other depreciated personal property is treated as ordinary income. These same assets sold through a CRT will avoid or defer this tax, permitting the full proceeds to be invested to generate lifetime income for the donors. Contribution of machinery or equipment generates a charitable deduction based on the donor’s basis in it.
For more information on using a Charitable Remainder Trust to bypass taxes on the sale of livestock, crops, machinery and equipment, call 800-517-1031.