Sale Of A Charitable Remainder Trust Interest Listed As A Transaction Of Interest

In Notice 2008-99, 2008-47 IRB (Nov. 24, 2008), the IRS listed as a “transaction of interest” a transaction involving the sale of interests in a charitable remainder trust used to avoid capital gains taxes on the appreciation in assets transferred to the trust. In the transaction, a donor reserves an annuity or unitrust interest in a charitable remainder trust and funds the trust with highly-appreciated assets. The trust sells the assets and reinvests the proceeds in other assets. The grantor and remainder beneficiary then sell their interests in the trust, and the grantor claims that no gain is recognized on the sale because the grantor's basis in his or her interest in the trust is a share of the trust's purchase-derived basis in the newly acquired assets, rather than a share of the basis in the assets originally transferred to the trust. Persons entering into these transactions on or after November 2, 2006, must disclose the transaction as described in Reg. § 1.6011-4 . Material advisors who make a tax statement on or after November 2, 2006, with respect to transactions entered into on or after that date, have disclosure and list maintenance obligations under Code Sec. 6111 and Code Sec. 6112 .

For more on the uniform basis rules for interests in trusts, see

Zaritsky & Lane & Danforth: Federal Income Tax Estates & Trusts ¶ 2.19

For more on the significance of a “transaction of interest,” see

Langbein: Bank Income Tax Return Manual ¶ 19.01[3][b][ii]

Saltzman: IRS Practice & Procedure ¶ 7B.16[3][b1][i]

Zaritsky & Lane & Danforth: Federal Income Tax Estates & Trusts ¶ 7.11[3]

Lipton & Walton, “Final Regulations for the Tax Shelter Disclosure Regime-Making the Rules More User Friendly,” 107 J. Tax'n 196 (Oct. 2007)

Lipton & Walton, “Treasury Improves the Disclosure Regime by Issuing New Temporary and Proposed Regulations,” 106 J. Tax'n 4 (Jan. 2007)

Allison & Carman, “Questions Unanswered in Prohibited Tax Shelter Provisions,” 19 Tax'n of Exempts 21 (Jan/Feb. 2008)

For More Information Contact The Atlanta, Georgia Law Offices Of AttorneyBritt:

AttorneyBritt
Gary L. Britt, CPA, J.D.
1200 Abernathy Road, Suite 1700
Atlanta, Georgia 30328

404-567-6445

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IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

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