Gifting Grain to a Charitable Remainder Trust: A Self-Employment Tax Play Worth Knowing
If you are facing a large tax hit at retirement, consider a CRT.
If you raise grain and you’re charitably inclined, here’s a strategy that does three things at once. It wipes out the self-employment tax on a chunk of your crop, spreads the income tax over years instead of one painful spike, and eventually puts money in the hands of a charity you care about. The tool is a charitable remainder trust (CRT), and the key is contributing the grain itself, not the sale proceeds.
How it works
A cash-basis farmer has zero tax basis in raised grain. You already deducted the seed, fertilizer, fuel, and chemicals, so when you sell that grain, the entire check is ordinary income. And because it’s Schedule F farm income, it also gets hit with self-employment tax.
Now flip it. Instead of selling, you contribute the actual bushels to an irrevocable CRT before there’s any sale contract. The trustee, not you, then sells the grain. Because a CRT is tax-exempt, that sale triggers no immediate tax. The trust pays you a set percentage each year for the term you choose (up to 20 years, or for life), and whatever is left at the end goes to charity.
