Tax-Exempt Sec. 664 Real Estate Shelter Trusts
Introduction
Real estate investment is a lucrative way to build wealth, but it also comes with a hefty tax burden. Fortunately, there are ways to minimize that burden by using tax-exempt trusts. One such trust is the Sec. 664 Real Estate Shelter Trust, which allows you to donate real estate to charity and receive tax benefits in return.
What is a Sec. 664 Real Estate Shelter Trust?
A Sec. 664 Real Estate Shelter Trust is a type of charitable remainder trust (CRT) that allows you to donate appreciated real estate to charity while still receiving income from the property during your lifetime. The trust is named after Section 664 of the Internal Revenue Code, which outlines the rules and regulations for CRTs.
How Does it Work?
When you donate real estate to a Sec. 664 Real Estate Shelter Trust, the trust sells the property and invests the proceeds in income-producing assets. You receive a charitable deduction for the full fair market value of the property, which can be used to offset your taxable income. You also receive an income stream from the trust for a specified period of time or for the rest of your life.
What are the Tax Benefits?
There are several tax benefits to using a Sec. 664 Real Estate Shelter Trust. First, you receive a charitable deduction for the full fair market value of the donated property, which can be used to offset your taxable income. Second, you avoid paying capital gains tax on the sale of the property. Third, you receive a steady income stream from the trust, which is typically taxed at a lower rate than other forms of income.
What are the Requirements?
There are several requirements that must be met in order to use a Sec. 664 Real Estate Shelter Trust. First, the trust must be irrevocable, meaning that once the property is donated, it cannot be taken back. Second, the trust must be set up to benefit a qualified charity. Third, the trust must distribute at least 5% of its assets to charity each year.
Conclusion
A Sec. 664 Real Estate Shelter Trust is a powerful tool for minimizing your tax burden while still receiving income from your real estate investments. By donating your property to charity, you can receive a charitable deduction, avoid capital gains tax, and receive a steady income stream for the rest of your life. If you're interested in setting up a Sec. 664 Real Estate Shelter Trust, be sure to consult with a qualified tax professional to ensure that you meet all of the requirements.