Sale and Unitrust

Gene and Carol live in Fairfax County. They purchased stock in a small medical service company several years ago and the company has done quite well. A larger company is now discussing the possibility of buying the smaller company. This sale would require that Gene and Carol sell their stock, subjecting them to capital gains taxes. Gene and Carol are looking for a way to avoid this predicament.

Gene: We were fortunate to invest in the medical services company. The services this company provides have become more and more important, especially for senior Americans. We thought the value of this stock would grow, and it did. We originally paid $50,000 for the stock, and it had grown to $400,000 in value.

Carol: We talked about selling the stock, but that would have required us to pay a large tax bill. We had hoped to sell the stock to buy a vacation home. We had found a very nice summer cottage for sale on Smith Mountain Lake. The price was approximately $120,000.

Gene: We checked with our CPA; he suggested that we talk to the folks in the Development Department at Boys Home. They told us about a sale and unitrust. We were happy to discover that with a sale and unitrust we could transfer $280,000 worth of the stock into a special trust called a charitable remainder unitrust. The unitrust could then sell the stock tax free.

Carol: Best of all, we were able to sell the rest of the stock for $120,000 cash. The deduction from the gift transferred to the trust saved enough in taxes to offset the capital gains tax on the $120,000 that we received from the stock sale. As a result, we could use the full $120,000 to purchase the lake home.

Gene: This was a wonderful arrangement. We now have income and are enjoying our dream of living on the lake. Best of all is that we can help so many of the youngsters at Boys Home. We never knew such a thing was possible.

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