For appreciated marketable securities owners who do not want to wait until the income tax-free step-up in basis at death or cannot take advantage of it at death because the appreciated stock is owned by an irrevocable grantor trust1 that is not exposed to the estate tax, a limited approach obtaining liquidity is touse a margin loan. That may not be satisfactory, as the built-in gain still exists when pledging an appreciated asset as collateral for a loan. However, one can use a charitable remainder trust (CRT) to defer the reporting of the realized gain if one desires to sell the marketable securities while living.
The first part of this article provides a brief overview of how CRTs are treated for federal income tax purposes. The second part will demonstrate how the CRT can obtain income tax deferral of a taxable gain on a cash sale of an asset, with a caution about its limitations and its risks.