Proposed regulations - Special uniform basis rules for charitable remainder trusts 

January 16: The Treasury Department and IRS today released for publication in the Federal Register proposed regulations (REG-154890-03) under section 1001 and section 1014 that provide rules for determining a taxable beneficiary’s basis in a term interest in a charitable remainder trust upon a sale or other disposition of all interests in the trust to the extent that basis consists of a share of adjusted uniform basis.

Today's proposed regulations [PDF 228 KB] are intended to prevent a transaction (described in Notice 2008-99 and identified as a transaction of interest) in which a sale or other disposition of all interests in a charitable remainder trust (subsequent to the contribution of appreciated assets to and their reinvestment by the trust), results in the grantor or other noncharitable recipient receiving the value of that person's trust interest while claiming to recognize little or no taxable gain. Read TaxNewsFlash-United States (October 31 2008) [PDF 38 KB].

The proposed regulations provide a special rule for determining the basis in certain charitable remainder trust term interests in transactions to which section 1001(e)(3) applies (e.g., those where all interests in a trust are being transferred at the same time). In these cases, the proposed regulations provide that the basis of a term interest of a taxable beneficiary is the portion of the adjusted uniform basis assignable to that interest reduced by the portion of the sum of the following amounts assignable to that interest:

  • The amount of undistributed net ordinary income described in section 664(b)(1); and
  • The amount of undistributed net capital gain described in section 664(b)(2).

The rules in these proposed regulations are limited in application to charitable remainder annuity trusts and charitable remainder unitrusts as defined in section 664.

Effective date

The regulations are proposed to apply to sales and other dispositions of interests in charitable remainder trusts occurring on or after January 17, 2014 (the day the proposed regulations are scheduled to be published in the Federal Register), except for sales or dispositions occurring pursuant to a binding commitment entered into before January 17, 2014.

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