Dear Mr. Berko:

About 15 years ago, my wife and I bought an acreage outside Phoenix for $75,000. The area is now a flourishing town called Glendale, Ariz., and we have been getting pretty good offers to sell the place. The last offer was for $1.2 million.

We live in Durham, N.C., and I plan to sell my dental practice next year and work part time for the new buyer to keep busy. I want to sell this acreage and invest the proceeds into something that will pay us an income that we will use for pocket money.

I would like to eliminate or greatly reduce the taxes we would have to pay on the sale, so we will have as much of the proceeds working for us as possible. Please advise.

J.S., Durham, N.C.

Dear J.S.:

The top capital gains tax rate is 15 percent and your liability on a gain of $1.13 million is $169,000. Pay the vigorish and don’t be such a cheap, bleeding jerk. Consider that $169,000 tax as rent you pay for living in the greatest country in the world. You’ll still have $1.03 million for income investing.

I suggest that you visit an attorney in Durham and ask about donating your acreage to a charitable remainder trust, or CRT. Don’t panic; you will get your money back.Your attorney and accountant can structure the donation so that you and your spouse receive a lifetime income, which will be based upon the $1.2 million sale price of the land.

At the same time, you will pledge an attractive gift to a charity of your choice, qualify for an immediate tax deduction and avoid potential estate taxes on the acreage.Anybody can have a CRT, but it works best for folks over 55 due to the actuarial tables that calculate when and how much money the charity will receive. Your attorney will name you and your spouse as the income beneficiaries and the charity as the charity beneficiary.

After deeding the acreage to the CRT, your accountant may advise that you are entitled to a one-time tax deduction of about $185,000. The amount of the deduction depends on your ages, the income you will receive from the investments and some zany actuarial calculation regarding the future and present value of money for a set number of years.

You will have to appoint a trustee to sell the acreage and put the proceeds in the CRT. Because the trust doesn’t pay taxes on the gain, it can invest all the sales proceeds to provide you with an attractive income.

Many folks who set up CRTs use an annuity trust to fund their income stream. This can pay a specific dollar amount. In this instance, the law requires a minimum annual distribution of 5 percent. A 5 percent income stream on $1.2 million would give you $60,000 a year, which should be enough to keep you and your spouse in pizza, pretzels and beer.

Others would recommend a unit trust that can pay both of you a percentage of the account’s beginning value annually. These are the most frequently used investment vehicle, however, there are others that can provide you with higher returns. I’ll leave them for another column.

Most folks want to receive their income as soon as possible, but if you wish, you can delay the income stream to a time and place of your choosing.   When you and your spouse die, the remaining value of the annuity trust or unit trust or alternative investment in the CRT will pass to the Humane Society, your church, your alma mater or other charity of your choice.

Of course, there’s that damnable paperwork that never goes away. And there’s a ridiculously costly tax return that has to be prepared every year, and you will need to pay an administrator, who will charge a ransom for doing virtually nothing, to be certain you comply with Internal Revenue Service rules and regulations.

However, I think you will find that the paperwork, the regulations and changes in regulations and employing an administrator and accountant (who will collectively charge you about $9,000 a year) to be a tedious and expensive bore. If I were you, I’d just sell the acreage and put the after-tax proceeds in a personal joint account with an adviser who can provide an 8 percent return.

Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla., 33429 or e-mail him at malber@adelphia.net.