Academic journal article Journal of Accountancy

Guidance Issued on Dividing CRTs, Assisting Divorcing Couples and Squabbling Annuitants

Academic journal article Journal of Accountancy

Guidance Issued on Dividing CRTs, Assisting Divorcing Couples and Squabbling Annuitants

Article excerpt

The IRS has issued Revenue Ruling 200841 (www.irs.govlpub/irs-droplrr-Od41.pdf) confirming that charitable remainder trusts (CRTs) can be divided into separate but equal trusts for each recipient without adverse tax consequences. If properly divided, the separate trusts will continue to qualify as CRTs, and no private foundation termination excise taxes will apply under IRC [section] 507(c). Nor will the division be treated as a sale, constitute an act of self-dealing under section 4941, or constitute a taxable expenditure under section 4945. Such divisions are common when the income recipients desire to separate their interests and when joint income recipients divorce.

The ruling clarified that the division of the trust into separate trusts does not disqualify the separate trusts as CRTs under section 664(d) as long as the division is pro rata and the separate trusts have the same governing provisions, recipients, remainder beneficiaries, total remainder interests and assets as the original trust--with some exceptions. In both of two examples given, the recipients paid all the costs of the division. The IRS also said that qualifying divisions do not constitute a sale, exchange or other taxable disposition producing gain or loss.

The ruling provides greater assurance that in the case of annuitants with concurrent present interests, each party can relinquish its successor interests after the other party's death. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.