IRS Adds Certain CRATs to Listed Transactions

The IRS has proposed regulations that would include certain charitable remainder annuity trusts (CRATs) among the listed transactions. Trusts included in the regulations include those funded with property with a higher fair market value (FMV) than the taxpayer's tax basis in the property, and where the taxpayer then claims that the funding triggers a step-up in basis (so that gains on the sale of the appreciated property would not generate tax liability). When the IRS "lists" a transaction in this manner, it can seek increased penalties from taxpayers who engage in the type of transaction (up to 40% if the IRS finds the transaction lacked economic substance). Advisors who play a material role in these transactions must also disclose their role annually to the IRS and maintain a list of clients they have advised. Comments on the proposed regulations are due by May 24, 2024. For more information on CRATs, visit Tax Facts Online. : Q 8088.