By Todd Cohen
RALEIGH, N.C. — Meredith College in Raleigh will get a new scholarship program and Kinston will get new housing for residents displaced by Hurricane Floyd, thanks to a charitable trust created by an 82-year-old Winston-Salem graduate of the women’s school.
The trust also will generate income for the donor during her lifetime and help her avoid what could have been a hefty tax bill.
Meredith graduate Thomasine Hayes had planned in her will to leave to the school the family farm of roughly 100 acres that she and her brother and sister inherited after their father died in 1949.
Last August, however, she decided she wanted some extra income, so she sold an option on the land to a Kinston developer. She specified that the land be used to replace housing lost to the hurricane and the flooding it caused.
She then learned that she could have handled the deal differently by creating a charitable trust. She also learned that, even had she created a trust, her sale of the option still would require her to pay a capital gains tax on the land, which is worth nearly $600,000.
So rather than agreeing to the developer’s request to renew the option when it expired in December, Mrs. Hayes created the trust. She donated the land to the trust and, as trustee, sold the developer a new option.
Pending rezoning of part of the land, the trust plans to sell it to Community Developers Inc., which will build 281 homes over the next three years to replace housing lost to Floyd.
Construction on the $41 million project will begin by early March, says Daniel Craven, co-owner of Community Developers and owner of Craven Construction Co. Each home will be sold for $75,000.
Mrs. Hayes will receive income from the trust during her lifetime. At her death, Meredith will receive the trust assets, which will fund scholarships in her parents’ names for students in Kinston and northeastern North Carolina.
To avoid a capital-gains tax on a gift from proceeds of the sale of assets, says Ran Bell, a tax lawyer in Winston-Salem with Womble Carlyle Sandridge & Rice who represents Meredith, a donor should make the gift before the sale is a certainty – before selling a land option or, in the case of stock, before getting shareholder approval.