$500K of Appreciated Stock Into a CRAT: $193K to Charity, $67.8K Tax Saved Today

Selling appreciated stock without paying the capital gains tax

We ran a common scenario through the calculator: $500,000 of appreciated stock (a $100,000 original cost basis) funded into a charitable remainder annuity trust, paying 5% annually for 20 years, at a 5.2% IRS §7520 discount rate. The trust — a tax-exempt entity — sells the stock without triggering the capital gains tax a direct sale would owe, avoiding $80,000 in tax on the $400,000 gain entirely. The donor receives $25,000 a year for 20 years, and takes an immediate income-tax deduction of $193,661 — the present value of what the charity eventually receives — worth $67,781 in tax savings at a 35% marginal rate.

The mechanics only work within limits: push the payout rate too high relative to the term, and the present value going to charity falls below the IRS's 10% minimum — at that point the structure doesn't qualify as a CRT at all, regardless of how much the donor wants from it.

How the math works

Annual payout = asset value × payout rate. Present value of the income interest = annual payout × [1 − (1+r)^−n] ÷ r (an ordinary annuity at the §7520 rate). Present value of the remainder = asset value − present value of the income interest — this identity holds by definition, since the §7520 rate is precisely the IRS's required rate for splitting the two interests. That remainder value is the charitable deduction basis; the IRS requires it to be at least 10% of the initial funding value.

Source: IRC §664 (charitable remainder trusts), IRC §7520 and Treas. Reg. §25.7520-1 (present-value methodology), IRC §170 (charitable deduction, subject to AGI percentage limitations not modeled here — typically 30% of AGI for appreciated property to a public charity, with a 5-year carryforward).

Math runs locally. Inputs never leave your browser.Source on github.

Where this calculation doesn't apply

• You want payments for life, not a fixed term.A life-estate CRT uses IRS mortality tables (based on age) instead of a fixed term — this tool models only the term-of-years version, which doesn't need mortality assumptions.
• The payout rate and term together fail the 10% remainder test.A high payout rate on a long term can push the remainder below the IRS's required minimum — the trust wouldn't qualify as configured, and this tool flags that directly rather than showing a misleading deduction figure.
• You need immediate liquidity, not an income stream.A CRT converts a lump sum into payments over time plus a deduction — it doesn't hand back a large cash amount up front the way an outright sale would (after tax).
• The deduction exceeds your AGI limitation for the year.Appreciated-property gifts to a public charity are generally capped at 30% of AGI, with unused amounts carried forward up to 5 years — a large deduction relative to income may not be fully usable in year one.

What to actually do

1. Check the current month's IRS §7520 rate rather than assuming — it changes monthly and directly affects the income/remainder split.
2. Confirm the payout rate and term combination clears the 10% remainder test before committing to a structure.
3. Talk to a tax professional about whether the full deduction is usable given your AGI in the funding year, and the 5-year carryforward if not.
4. Get an attorney to draft the trust and identify a trustee — a CRT is an irrevocable structure with real administrative requirements.
5. Compare against a QCD (for IRA assets, if 70½+) or a donor-advised fund if the goal is simpler and doesn't need the income-stream feature.