How to sell concentrated stock while often deferring the immediate tax hit, using a charitable trust

Jul 2026 · 4 min read

You have a large position in one stock, maybe from years of equity comp or a single lucky bet, sitting on a big unrealized gain. Selling it outright to diversify means writing a large capital-gains check now, often a meaningful share of the gain once federal and any applicable state taxes are counted. A charitable remainder trust is a way to sell it while often deferring that immediate tax, take income from the proceeds for years, and leave what is left to a cause you choose.

How a charitable remainder trust works

You move the appreciated stock into an irrevocable trust. The trust itself is generally treated as tax-exempt, so when it sells the stock inside the trust, there is typically no immediate capital-gains tax at the time of sale. The whole amount, not what is left after tax, stays invested and can finally be diversified. The trust then pays you, or you and your spouse, an income stream for life or for a set number of years. Whatever remains at the end goes to the charity you named. In exchange for that future gift, you get a partial charitable deduction now, based on the value of what the charity is projected to receive.

The point is not that you avoid all tax. It is that the money works harder because the whole position, untaxed, keeps earning, and you convert a concentrated risk into a diversified income stream.

The rate that affects the deal

How big your deduction is, and how the payout is valued, depends on an IRS interest rate called the §7520 rate, published monthly. It also drives a test the trust must pass: the charity's projected share has to be worth at least 10% of what you put in. When that rate is higher, the charitable remainder is valued more favorably, which is why the timing of when you set the trust up matters.

The trade-offs to weigh

A CRT is irrevocable. You are giving up the remainder for good, and the income you take is taxable as it comes out, in a set order that generally starts with ordinary income and capital gain before anything tax-free. It is powerful for the right situation and wrong for someone who may need the whole principal back.

If you do not have children, a CRT can fit especially well. It turns a concentrated position into income you can live on, and the remainder becomes a real legacy to a cause you care about rather than a default heir. For someone with strong charitable intent and no obvious person to leave a large position to, it lines the money up with what you actually want it to do.

Where it goes wrong

• Treating it as reversible. A CRT is irrevocable. Do not fund one with money you might need back in full.
• Ignoring the 10% test. If the projected charitable remainder is worth less than 10%, the trust does not qualify. Payout rate, term, and the §7520 rate all feed that.
• Forgetting the income is taxable. The payments you receive are taxed, largely as ordinary income and capital gain first. It defers and spreads tax, it does not erase it.
• Setting the payout too high. A rich income stream can shrink the charitable remainder below the line and leave little for the cause.

What to check before you fund one

• How large is the gain you would pay tax on if you simply sold?
• Do you have genuine charitable intent, or are you reaching for a tax deduction alone?
• How much income do you need, and can you give up the principal for good?
• Where is the §7520 rate now, and does the structure clear the required 10% remainder test?

If you are holding a concentrated position and weighing how to unwind it, the Gnomon Diagnostic models a straight sale against a charitable trust on your real numbers, income, deduction, and legacy included. Start yours at start.gnomonplan.com.

This is general tax information, not advice for your specific situation. Talk with us or your tax professional before acting on it.