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In This Issue

       

Gifting the family farm can benefit you and Wichita State

Wheat Field and Combine

From the Wichita State University campus or downtown Wichita, it takes only a short drive until one finds farm fields on both sides of the road. This reality also is apparent when flying into or out of Eisenhower National Airport in Wichita. From the air, you can see the multi-colored patchwork of pastures, crops and the circular pattern of center-pivot irrigation systems. Cattle ranches and fields of wheat, corn and soy beans literally surround us in Kansas. Agriculture is a big part of our heritage and of the current Kansas economy. In fact, our unique and beloved “WuShock” athletic mascot has its origins in Fairmount College, predecessor to WSU, when many students earned money for college by cutting and stacking (shocking) wheat during the summer harvest.

While some of our alumni work in agriculture, we also encounter those who don’t actively farm, but have ownership interests in a farm or ranch. Retiring farmers and ranchers who do not have heirs to take over the operation and those non-participating owners who are ready to relinquish their management responsibilities sometimes turn to philanthropic answers to the question of what to do with the family farm.

Depending on your situation, a gift of farm or ranch land can support the WSU students, faculty and programs of your choice, and provide you with a charitable income tax deduction, avoidance of capital gains tax and a lifelong stream of income.

Outright Gift: For example, Farmer WU has 160 acres of farmland worth $4,000 per acre that he has owned for more than one year, with a cost basis of $1,000 per acre from purchase 20 years ago. If Farmer WU were to make an outright charitable gift of this farmland to the WSU Foundation, he would be entitled to a charitable income tax deduction of $640,000 (up to 30 percent of adjusted gross income in any one year) and he would avoid any capital gain tax on the $480,000 long-term gain.

Life Income Gift: If Farmer WU wants to dispose of his land, but still needs the income from this asset, a gift of the land into a Charitable Remainder Unitrust (CRUT)* might be an ideal solution for the landowner and WSU. Using the same land illustration as above, if Farmer WU sets up 5 percent two-life unitrust, he will receive a charitable deduction of $308,954 and $32,000 per year for the rest of his life and the life of his wife. After their deaths, the remainder of the trust (projected to be $640,000) would be directed to the WSU Foundation to benefit the WSU program(s) selected by the donors. This illustration assumes a 28 percent income tax bracket and 5 percent trust return.

*With the illiquid asset of land, this trust would technically be structured as a Net Income Charitable Remainder Unitrust with a Flip provision. Until the land is sold by the trustee, the trust would provide the donor the lesser of the actual trust income or 5 percent. After the lands sells, providing the trust with liquid assets, the trust then “Flips” to a traditional CRUT and begins paying the donor(s) 5 percent of the trust balance, recalculated annually.

In both of the above scenarios, the donor would direct the outright gift or charitable remainder gift to benefit the WSU program of his or her choice.

Ask us for more details

For more information regarding gifts of land or trusts, contact:

J. Michael Lamb
J. Michael Lamb '80, EMBA, CFRE
Vice President for Planned Giving
316-978-3809 or mike.lamb@wichita.edu
  Darin Kater
Darin Kater, MS
Associate Vice President of Planned and Annual Giving
316-978-3887 or darin.kater@wichita.edu

 

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