So schweser tells us Charitable trusts (charitable remainder trusts and charitable lead trusts) are efficient ways to ‘avoid taxes on low basis stocks’. I dont really understand why. I understand that in charitable trusts, distributions to charity can offset income or capital gains, but how does this actually transfer the wealth of a guy who just has loads of shares in the IPO he just did without paying capital gains tax on this low basis? Is the basis re-established upon entering the trust? Is the annuity paid to him by a CRT free of tax?
he get’s the deduction on the market price of the stock and pays no taxes on the capital gain.
but the money isnt his, it belongs to the trust, and he has forfeited access? how does he actually get the money into his bank account to spend without paying tax?
he gets the income on the assets in the trust for a CRT. if you include that and the tax deduction you probably come out on top in the long run. this isn’t a strategy you use by itself. you usually sell some of the stock outright and set up a crt to offset some of the taxes.