Free Wealth Management Guide Investing Proceeds From the Sale of Farm or Ranch | Page 3

estate investor to exchange land into many different types
of commercial real estate such as office buildings, rental
homes, apartment complexes, retail centers, etc.
A 1031 Exchange Offers the Following Benefits:
1. Defers tax on the sale of appreciated property.

2. Preserves equity for investment purposes.

3. Allows you to diversify into multiple replacement
properties.

preciated real estate. In addition, a CRT can also be used
to avoid or defer tax on the sale of livestock, equipment
and stock. Combining a CRT and a 1031 Exchange can be
a powerful combination for preserving wealth, diversifying investment assets and providing lifetime income.
A Charitable Remainder Trust Offers The Following
Benefits:
1. Avoid capital gain taxes on the sale of appreciated
property.
2. Generate a lifetime income stream.

How It Works:
3. Diversification of investment assets.
1. As the property seller, you must include language in the
Purchase and Sale Agreement establishing the intent to
perform a 1031 tax deferred exchange upon sale.

2. At the closing, sales proceeds must go to a Qualified
Intermediary (QI) and are held in a separate account for
your benefit.
3. At this point you have 45 days to identify replacement
properties for the potential 1031 exchange. This involves
written notification to a QI listing the properties’ addresses and/or legal descriptions of the potential new
property(s) you will be buying.

4. Potentially save estate taxes.
5. Benefit a charitable organization near and dear to your
heart.
How it Works:
1. You as the owners of the property establish a CRT with
the help of an attorney, naming one or more charities of
your choice as beneficiaries to receive the remaining assets left in the trust after your death.
2. You gift property to the CRT.

4. You have up to 180 days from the closing of the old
property (relinquished property) to actually complete the
purchase of the identified replacement property(s).
5. To fully defer tax on your capital gain, you must purchase replacement property that is of the same or greater
value as the property that has been sold. You can do a
partial exchange but with a partial exchange you may be
subject to tax.
6. To fully defer tax, you must also have the same or
greater amount of debt on the replacement property as
the relinquished property.

3. You receive an immediate charitable income tax deduction.
4. The trustee of the CRT sells the property and
since it is a tax-exempt entity, it does not pay capital
gains tax.
5. With guidance from the donors and possibly an investment advisor, the trustee of the CRT invests the sale
proceeds in a diversified investment portfolio within the
trust.

For more information on 1031 Exchanges, request Wealth
Guide titled: IRC Section 1031 Exchange.

6. The CRT distributes a percentage of the trust property
annually to the donors. These payments can last for the
lifetime of the donors or for a specified term of years.

Charitable Remainder Trust

7. Upon your death, the remaining trust assets pass to
the one or more charities of your choice.

A Charitable Remainder Trust (CRT) is another powerful
tool to avoid or defer capital gain tax on the sale of ap-

For more information, request Wealth Guide titled: IRC

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