Treasury finalizes rules making some charitable trust deals listed transactions

Treasury and the IRS issued final regulations on July 8 identifying certain charitable remainder annuity trust arrangements as listed transactions, reported by Martha Waggoner at the Journal of Accountancy. The rules took effect July 9. The identified structure runs in steps. A grantor funds a CRAT with property worth more than its basis, the trustee sells the property, and the trustee buys a single premium immediate annuity. The beneficiary then reports the annuity amount under section 72 rather than under the section 664 tier rules. Participants and material advisers must disclose, and face penalties for failing to do so. Charities whose only interest is as a charitable remainderman are not treated as participants. Proposed regulations appeared in March 2024. The Justice Department sued in February 2022 over roughly 70 such trusts.