<story><title>Derek Sivers and the Art of Enough</title><url>https://brendancahill.io/brensblog/dereksivers</url></story><parent_chain><item><author>tkiley</author><text>I had a bunch of equity in a startup that had a cost basis of, essentially, $0. Under normal circumstances, I would have sold this for $millions, and would have paid nearly 20% in capital gains taxes immediately.&lt;p&gt;Instead, I contributed my equity to a CRUT. I paid zero capital gains taxes at that moment, and the CRUT pays zero capital gains taxes ever. Also, because a contribution to the trust is a contribution in part to charity (with proportions calculated according to actuarial figures of my life expectancy), I got a charitable tax deduction of many million dollars which I was able to carry forward for many years.&lt;p&gt;Each year I owe taxes on the 5% which the CRUT distributes to me every year, but since this is capital gains income, it is taxed at a very low rate -- which is effectively reduced even further because it is offset by the charitable deduction which I have been able to carry forward.&lt;p&gt;The net effect is that I&amp;#x27;m paying capital gains taxes in a tiny trickle over the remainder of my lifetime, and I also got a giant charitable deduction to offset those capital gains taxes. When I die, the principal in the trust goes to charity. The IRS will never get the kind of bite at this equity that I would intuitively expect it to get.&lt;p&gt;I don&amp;#x27;t understand how this capital gains tax loophole could be beneficial to society. I think it should be removed from the tax code.&lt;p&gt;Another side effect of the CRUT I hadn&amp;#x27;t anticipated: Occasionally, I note the intrusive thought that my continued life is the one and only barrier which is keeping a decent amount of capital from serving charitable purposes right now. That&amp;#x27;s honestly pretty depressing sometimes.</text></item><item><author>skrebbel</author><text>Wow cool! For those of us who don&amp;#x27;t regularly create charitable remainder trusts, what are the tax consequences and why are they unfair?</text></item><item><author>tkiley</author><text>Derek&amp;#x27;s writing influenced me quite a bit in the early 2000s. I bootstrapped a software business from zero to near $10m in annualized revenue, and sold it almost half a decade ago. I contributed 100% of my equity into a charitable remainder trust because I learned about that idea from his website.&lt;p&gt;Since then, I&amp;#x27;ve done a lot of &amp;quot;puttering&amp;quot;. I&amp;#x27;m teaching myself jazz guitar, and I&amp;#x27;m currently enrolled in law school. I have basically unlimited time to read whatever interests me. If I could go back five years and give myself some advice, I would say that &amp;quot;enough&amp;quot; is not durably satisfying. Purpose is durably satisfying. Purpose arises from constraints. Having &amp;quot;enough&amp;quot; means you lack a particular type of constraint. Thus, enough&amp;quot; can get in the way of developing purpose, particularly if you are somewhat undisciplined like me.&lt;p&gt;(Also, I would abolish charitable remainder trusts from the tax code. I created one for lifestyle reasons not tax reasons, but after experiencing the tax consequences firsthand, I think they are profoundly unfair.)</text></item></parent_chain><comment><author>skrebbel</author><text>Thanks! I think I get it, but not fully yet: if you&amp;#x27;d deplete the entire trust before dying, you&amp;#x27;d have paid the same capital gains tax as you would&amp;#x27;ve if you had not made the trust, correct? Just spread out over many years.&lt;p&gt;Why do you feel that it is a loophole if you pay the same, just at different times? (except over what you give to charity, but isn&amp;#x27;t charity untaxed pretty much across the board in the US?)&lt;p&gt;EDIT: by they way, yours is the first tax related comment that I recall reading that complains about unfair rules that are in your favour. Hats off, I had expected the opposite answer.</text></comment>
<story><title>Derek Sivers and the Art of Enough</title><url>https://brendancahill.io/brensblog/dereksivers</url></story><parent_chain><item><author>tkiley</author><text>I had a bunch of equity in a startup that had a cost basis of, essentially, $0. Under normal circumstances, I would have sold this for $millions, and would have paid nearly 20% in capital gains taxes immediately.&lt;p&gt;Instead, I contributed my equity to a CRUT. I paid zero capital gains taxes at that moment, and the CRUT pays zero capital gains taxes ever. Also, because a contribution to the trust is a contribution in part to charity (with proportions calculated according to actuarial figures of my life expectancy), I got a charitable tax deduction of many million dollars which I was able to carry forward for many years.&lt;p&gt;Each year I owe taxes on the 5% which the CRUT distributes to me every year, but since this is capital gains income, it is taxed at a very low rate -- which is effectively reduced even further because it is offset by the charitable deduction which I have been able to carry forward.&lt;p&gt;The net effect is that I&amp;#x27;m paying capital gains taxes in a tiny trickle over the remainder of my lifetime, and I also got a giant charitable deduction to offset those capital gains taxes. When I die, the principal in the trust goes to charity. The IRS will never get the kind of bite at this equity that I would intuitively expect it to get.&lt;p&gt;I don&amp;#x27;t understand how this capital gains tax loophole could be beneficial to society. I think it should be removed from the tax code.&lt;p&gt;Another side effect of the CRUT I hadn&amp;#x27;t anticipated: Occasionally, I note the intrusive thought that my continued life is the one and only barrier which is keeping a decent amount of capital from serving charitable purposes right now. That&amp;#x27;s honestly pretty depressing sometimes.</text></item><item><author>skrebbel</author><text>Wow cool! For those of us who don&amp;#x27;t regularly create charitable remainder trusts, what are the tax consequences and why are they unfair?</text></item><item><author>tkiley</author><text>Derek&amp;#x27;s writing influenced me quite a bit in the early 2000s. I bootstrapped a software business from zero to near $10m in annualized revenue, and sold it almost half a decade ago. I contributed 100% of my equity into a charitable remainder trust because I learned about that idea from his website.&lt;p&gt;Since then, I&amp;#x27;ve done a lot of &amp;quot;puttering&amp;quot;. I&amp;#x27;m teaching myself jazz guitar, and I&amp;#x27;m currently enrolled in law school. I have basically unlimited time to read whatever interests me. If I could go back five years and give myself some advice, I would say that &amp;quot;enough&amp;quot; is not durably satisfying. Purpose is durably satisfying. Purpose arises from constraints. Having &amp;quot;enough&amp;quot; means you lack a particular type of constraint. Thus, enough&amp;quot; can get in the way of developing purpose, particularly if you are somewhat undisciplined like me.&lt;p&gt;(Also, I would abolish charitable remainder trusts from the tax code. I created one for lifestyle reasons not tax reasons, but after experiencing the tax consequences firsthand, I think they are profoundly unfair.)</text></item></parent_chain><comment><author>DennisP</author><text>Whether that&amp;#x27;s bad depends on how you feel about the way your government spends tax money. Because you used a CRUT, the money that doesn&amp;#x27;t support you will go to some worthy charity, instead of funding a series of wars, pervasive surveillance, and cages for kids.&lt;p&gt;Of course the government also does many worthwhile things, but your extra money will be spent entirely on worthwhile things, and not at all on horrific ones.</text></comment>