Second, donors may not live in a personal residence that has been donated to an irrevocable charitable remainder trust. These two rules frustrate many donors who want to make a gift of their home. Most commonly, real estate is used to fund an irrevocable net income unitrust with a make-up provision. Because there is usually a delay in the sale of property, the trust is delayed in producing the necessary income to pay the donors. To deal with this delay, the donors create a net income unitrust with a makeup provision that provides the donors with a stated percentage of the value of the property, or net income, whichever is less.
Donors make up the income lost during the delay in the sale of the real estate, in a later year.
The donors also receive a charitable income tax deduction in the year the trust is established, limited to 30 percent of the their adjusted gross income. Rio Grande . . .