How to Legally Pay ZERO Tax on Crypto

How to Legally Pay ZERO Tax on Crypto. Mark Kohler (Tax & Legal Expert) on 11/4/25. See partial transcript, AI summary, and video link below:

https://www.youtube.com/watch?v=IKZWgS-rYbI
How the Wealthy Sell Crypto and Pay ZERO Taxes (Legally!)
Mark J Kohler
Nov 4, 2025

CHAPTERS:
0:00 Intro
1:06 The Problem with Selling Crypto the Traditional Way
1:57 The Legal Loophole the Wealthy Use: Charitable Remainder Trusts
4:21 The 9 Steps to Set Up and Use a CRT for Crypto Gains
9:51 Why It Works — and Why the IRS Allows It
10:32 Example Scenario
11:16 Recap
11:43 Outro

10:33 – Quick example, let’s say you bought some crypto for $200,000, and now it’s worth a million. That’s an $800,000 gain. Now, normally you’d roughly pay about $250,000 in tax. but instead you transfer that crypto into the CRUT, sell it tax-free, and get approximately a $100,000 tax deduction. You get to reinvest that million inside the trust and draw approximately $50 to even $150,000 per year based on the rate designated under the tables at the IRS. When you pass away, the remaining balance goes to your favorite charity, and your heirs inherit a big chunk of money tax-free. That’s how you turn a $300,000 tax problem into a lifetime income stream and a lasting Recap legacy

NotebookLM AI Summary:

The sources detail a legal strategy the wealthy use to sell highly appreciated crypto assets while minimizing or eliminating the upfront tax burden, employing a financial tool known as the Charitable Remainder Unit Trust (CRUT).

The Problem with Traditional Crypto Sales
When crypto assets are sold the traditional way, a significant tax bill is triggered. The IRS recognizes crypto as property, not currency, meaning that sales, conversions, trades, or even crypto-to-crypto swaps are taxable events.

• Long-term capital gains (assets held over 12 months) are taxed at a 20% federal rate, plus 3.8% for the net investment income tax, often resulting in tax rates over 30% to 35% when state taxes are included.
• Short-term gains are hit with ordinary income tax rates, which can be as high as 37%, plus state tax.

The CRUT Solution
The Charitable Remainder Unit Trust (CRUT) is a “legal loophole” designed to avoid this upfront tax hit. It is a special type of irrevocable trust that is permitted under IRS code section 664.

How the CRUT Works (High-Level Structure):

1. The owner donates highly appreciated assets (like crypto) into the trust.
2. The trust, being a tax-exempt charitable entity, sells the assets tax-free.
3. The proceeds remain invested inside the trust, creating a larger capital base (“bigger pie”) to work with because no upfront tax was paid.
4. The donor receives a fixed income stream for life.
5. When the trust ends (based on a set term or the donor’s life expectancy), the remainder goes to the designated charity.

Key Benefits of the CRUT
Using a CRUT transforms what would be a large tax bill into a lifetime income source and a lasting legacy. The five main benefits include:

1. Tax-Free Sale: The crypto is sold tax-free inside the trust, allowing the investor to keep 100% of the value working and compounding.
2. Immediate Charitable Deduction: The donor receives an immediate tax deduction on their current tax return, based on the present value of the future gift the charity will receive. This deduction can offset other income, such as W2 income, if the donor itemizes.
3. Income for Life: The donor receives a stream of income based on a calculation tied to the trust’s value.
4. Asset Protection: Assets inside the trust are protected from lawsuits, creditors, or plaintiffs.
5. Investment Control: The donor can typically remain the investment trustee and continue to buy and trade investments (including more crypto or stocks) tax-free inside the trust.

The Implementation Process (The Nine Steps)
The strategy requires careful coordination with tax advisors and legal counsel.
Step – Action – Detail

1. Create the CRUT – An attorney must draft the irrevocable trust before any transfer or sale to avoid the IRS viewing the gain as personally realized.
2. Donate the Crypto – The donor transfers the actual crypto tokens to a wallet set up for the trust. This is treated as a charitable contribution.
3. Sell Tax-Free – The trust sells the crypto and converts the proceeds to US dollars (funding the trust’s bank account).
4. Calculate Deduction – The present value of the future charitable gift is calculated (based on age and federal interest rates) and used as a tax deduction on the donor’s current return.
5. Annual Valuation & Payout Percentage – A third-party administrator annually values the trust (starting in January after formation). A payout percentage is determined based on actuarial tables (using age and gender) to ensure a remainder goes to charity. The older the donor, the bigger the payout percentage.
6. Quarterly Distributions – The trust distributes income every quarter based on the annual valuation and the predetermined percentage. While these distributions are taxable, the gain is spread out over time, potentially putting the donor in a lower tax bracket.
7. Protecting Heirs (The ILIT) – To address concerns from family members who might wonder why the wealth is going to charity, the CRUT can be combined with an Irrevocable Life Insurance Trust (ILIT). A portion of the quarterly distributions funds a life insurance policy which then pays out tax-free to the heirs, outside of the donor’s estate.
8. Remainder Goes to Charity – Upon the donor’s death, the remaining balance goes to the designated charity. The trust remains in effect for the donor’s life expectancy or 20 years, whichever is longer.
9. Legacy Concept – This strategy brings together the tax-free life insurance (for the family) and the chosen charity (which can be a family foundation designated by the donor), carrying out good works in the donor’s name.

The CRUT is encouraged by the government because it promotes charitable giving.

Analogy: Think of the CRUT as a locked time-capsule (the irrevocable trust). Instead of opening your treasure chest (highly appreciated crypto) and immediately giving 30% of your gains to the tax collector, you put the whole chest, untouched, into the time-capsule. The capsule immediately sells the assets without paying tax, meaning 100% of your treasure is reinvested and growing. You receive income payments from the growing funds for the rest of your life, and when the capsule is finally opened, the remainder goes to the charity you selected, leaving a legacy while providing you with income now.

Prophetic Money comment:

See other posts I made regarding CRT (Charitable Remainder Trust) and Wealth Transfer TAXES:

Here is a youtube community post I made, where I listed a Tax Strategy on Legally Avoiding Crypto Taxes by setting up a Charitable Investment Trust (CRT), DAF (Donor Advised Fund), and possibly even setting up your own Charity. However, keep in mind that recently there have been youtubers sharing prophecies/dreams about 501c3 status possibly being taken away from churches. Also tax laws in USA possibly changing and IRS being shut down. So there could be so many changes that we may not need a CRT after all or possibly need something else. https://www.youtube.com/post/UgkxMtzk8O_fgobVRym9DQXBeCjG7WdUFGh2

Here is a 4 minute clip by Mark J Kohler on How to Legally Avoid paying Crypto Taxes by creating a CRT (Charitable Remainder Trust). https://www.youtube.com/post/Ugkx50l6lT–j5ziqLnAQz_obv9toA0rWZn6

Here is a Fidelity article on reducing taxes by giving to charity – giving cash vs. transferring stocks/crypto directly. https://www.youtube.com/post/UgkxBv9wUmKe2LJSJ-yxz7SB_Zt9OsZHFiXe

Wealth Transfer Tax – Did you know that USA IRS rules require Americans to Pay Tax at a minimum, every Quarter (4 times per year)? Taxes are due when you earn income (not end of year). Not doing so would result in tax penalties. So when we receive our Wealth Transfer, we will be required to submit a quarterly tax payment to IRS. See YouTube community post below for more details: https://www.youtube.com/post/UgkxEuWNVAOEoyxKG4vVJ-9U1L1n6P6bQtpi

Also see the TAX section on my WordPress site for Tax prophecies: https://propheticmoney.com/category/tax/