Financial Planning With “Green Unitrusts”

Typically when a farmer sells his crops he must report the income he receives, but a “Green Unitrust” can be a savy money saving technique. Farmer can use crops (which are tangible personal property) to fund charitable remainder unitrusts, or “Green Trusts”. The farmer must transfer the crops using a deed of gift in order to later sell the crops tax-free trough the trust. Along with the deed of gift, the farmer must acquire a signed receipt by the transportation company and a confirmation of sale from the purchase.

Under Section 170(a)(3) of the tax code, an “intervening interest” is created from the transfer of assets into a unitrust, and the intervening interest stays effective until the donor relinquishes possession of the assets. For charitable remainder trusts, however, the deduction is delayed under Section 170(a)(3) until the asset is sold. At the time of sell, the asset is converted to cash so there is no longer an intervening interest.

Additionally, when a donor transfers tangible personal property to a charitable remainder trust, the asset is deemed to be an unrelated use. Because of this, the deduction is limited to the applicable unitrust factor multiplied by the cost basis.

“Green Unitrusts” not only benefit donors by proving for a possible charitable deduction, but these trusts also allow deference from ordinary income.

See “Green” Unitrusts, Community Foundation of Broward, Aug. 16, 2011.

Special thanks to Jim Hillhouse (WealthCounsel) for bringing this article to my attention.