The Internal Revenue Service (IRS) has issued new regulations that went into effect on August 12 that deal with determining the basis interest in Charitable Remainder Trusts (CRTs). In the past a client would be able to use a charitable remainder annuity trust (CRAT) as a way to reduce the overall tax burden. This article explains how a client and the remainder beneficiary could simultaneously sell their interest in the CRAT and as a result the client could claim a proportionate share of the CRATs basis. As a result of this transaction the client would be able to walk away with a significantly reduced capital gains tax. Under the new regulations a client would be required reduce the basis for his or her annuity interest by the proportionate share of both: “(1) the CRAT’s undistributed ordinary income, and (2) the CRAT’s undistributed net capital gain.”
See Jonathan Tidd, IRS Issues Final Regs on Sale of CRT Interests, Wealth Management, August 18, 2015.
Special thanks to Jim Hillhouse for bringing this article to my attention.
