IRS Regulations Name Certain CRAT Transactions as Listed Transactions

The IRS has finalized regulations listing certain transactions involving charitable remainder annuity trusts (CRATs) as listed transactions. Specifically, the regulations outline a transaction where a taxpayer attempts to eliminate ordinary income and gain on the sale of property. According to the IRS, in the transaction, the following occur (1) property with fair market value in excess of its basis (i.e., appreciated property) is transferred into a CRAT, (2) the CRAT sells the property and uses the proceeds (whether some or all) to purchase a single premium immediate annuity (SPIA) and (3) the taxpayer or beneficiary claims that the CRAT annuity is taxable to the recipient only to the extent of the income portion of the SPIA annuity payment. Participants and their material advisors are required to file disclosures with the IRS and are subject to penalties for failure to disclose. For more information on the rules governing CRATs, visit Tax Facts Online. Read More: Link to Q8088.