Private Letter Rulings
PLR
200124010 Donor's Early Termination of CRT and Distributions to Charity Approved:
Taxpayer created a Charitable Remainder Unitrust (CRUT). The CRUT was designed to pay 7% of the net fair market value of the trust assets, valued annually, for Taxpayer's lifetime. At Taxpayer's death, the trust document required that the trustee pay Taxpayer's estate a prorated final payment, and then distribute the trust principal to charities A, B, C and D.
PLR
200140027 An Early Division and Distribution of a CRUT to Charity Approved:
Taxpayer created a Charitable Remainder Unitrust (CRUT) several years ago which he funded with appreciated stock. The CRUT was drafted with a 5% payout, which would be paid first to Taxpayer then to Taxpayer's wife if she survived him.
PLR
200205008 Early Termination of a Portion of a NIMCRUT Produces Charitable Tax Deduction:
Husband created a two-life Net Income Plus Makeup Charitable Remainder Trust (NIMCRUT). The NIMCRUT was drafted to pay income to Husband and then to Wife, if she survived Husband. The unitrust income would be equal to the lesser of the trust payout percent or the net income of the trust during that year.
PLR
200208039 Unhappy CRUT Income Beneficiary Allowed to "Cash Out" and Terminate Trust:
Donor created a net plus makeup charitable remainder unitrust (NIMCRUT) to benefit donor and several other income beneficiaries. The NIMCRUT will pay out each year the lesser of the trust net income or 8% of the net fair market value of the trust assets. Donor has now died, and there is only one remaining income beneficiary.
PLR
200441024 Donor "Cashes Out" Her Term-of-Years CRUT:
Terri Taxpayer created a charitable remainder unitrust (CRUT) for her benefit. The CRUT had a term of 20 years and a high 10% payout. After 20 years, all of the CRUT assets would be distributed to Charity. Terri, however, wanted to terminate her CRUT prior to the lapse of 20 years. Moreover, she wanted to "cash out" or accelerate her remaining CRUT income payments at the time of termination.
PLR
200548023 Cash Out of CRUT Not Self-Dealing:
n 1996, Barney established a 16% charitable remainder unitrust (CRUT) for the shorter of his life or a term of 20 years. Barney and all parties involved decided it was in everyone's best interest to terminate the trust and cash-out Barney and the charity. The trustee requested a ruling that the termination would not result in an act of self-dealing and would not subject the trust to the private foundation termination tax.
PLR
200744019 Splitting Unitrust in Two Approved:
H and W created a charitable remainder unitrust (CRUT) under Code Sec. 664(d)(2). Trust provides trustee pay annual amounts to H for life and at his death to W. Trust operates as a FLIP and pays a fixed 9% of the fair market value of the assets valued annually.
PLR
200802024 Surrender of Income Interest in a CRT Results in a Charitable Deduction:
Taxpayers created two charitable remainder unitrusts (CRUTs) on Date X. Later, Taxpayers proposed to surrender their respective interests in the CRUTs to the charitable beneficiary named in both CRUT documents.
PLR
200802032 Cashing Out Charitable Remainder Trust Not Self-Dealing:
M's will directed the creation of a charitable remainder annuity trust (CRAT). The CRAT was to be funded with all of M's assets less her personal property. M's daughter, D, was to receive a 6% income interest for he life from CRAT with the remainder passing to two public charities, C1 and C2.
PLR
200808018 Proposed Trust Division Won't Result in Loss of CRT Status:
T created a net income plus makeup charitable remainder unitrust (NIMCRUT) with T and T's family trust as income beneficiaries and a qualified charitable organization as remainder beneficiary. T proposes to make a contribution of an undivided portion of T's unitrust interest to the charitable remainder beneficiary.
PLR
200809044 Early Termination of NICRUT Not Self-Dealing:
B and C are equal partners in N, a family limited partnership (FLP). N created a net income only charitable remainder unitrust (NICRUT) on date X. On date Y, N decided to terminate the NICRUT by selling its income interest back to the listed charitable remainder beneficiary.
PLR
200814003 Division Does Not Disqualify CRUT:
Husband and Wife created a charitable remainder unitrust (CRUT) with income to be paid to Husband for his life and upon his death to Wife for hers. Within three years of the CRUT's creation, Husband and Wife divorced. Under the terms of the divorce judgment the CRUT was divided into CRUT A and CRUT B.
PLR
200816032 Early Termination Not Self-Dealing; No Termination Tax:
A and B established C, a charitable remainder unitrust as described in Sec. 664(d)3) of the Code. C was created as a net income plus makeup unitrust (NIMCRUT) to pay A and B the lesser of net income or 10% of the trust's net fair market value, with the possibility for recouping lost payments in future years.
PLR
200817039 Early Termination of CRT Not Self-Dealing:
B and C established A, a charitable remainder unitrust under Sec. 664(d)(3). B and C served as trustee of A and D served as an independent special trustee. D resigned and an appointment of a successor was not required under the trust terms.
PLR
200824022 Division of CRT is Not Taxable:
H created Trust X as a charitable remainder unitrust (CRT) under Sec. 664(d)(2). Trust X directed the trustee to make unitrust payments to H for his lifetime and then to W, H's surviving spouse, for her lifetime. Upon the death of H and W, the trustee would distribute the remainder to a qualified charitable organization.
PLR
200833012 Early CRT Termination Not Self-Dealing:
A created a charitable remainder unitrust (Trust) naming A and A's spouse, B, as income beneficiaries. The trust was established as a net income plus makeup trust and the trustee was directed to make lifetime payments to the beneficiaries at the lesser of trust net income or a percent of the net fair market value of trust assets as valued annually.
PLR
200834013 Income Interest Transfer Qualifies for Deduction:
On Date 1, Husband (H) and Wife (W) created Irrevocable Trust which provided income to H and W for their lives and, upon the death of the survivor of them, would distribute the remaining balance to the charitable organizations designated by H and W.
PLR
200841040 Termination of CRUT Not Self-Dealing:
Grantor created Trust on Date X, a grantor trust upon which Grantor paid the tax each year. At Grantor's death, Trust was split into CRUT A and CRUT B, charitable remainder unitrusts within the meaning of Reg. 1.664-4. CRUT A was to pay 5% of its net income as determined annually to A for life and then to B if then living.
PLR
200846037 Termination of CRT to Create a Supporting Organization - No Termination Tax:
A was a Net Income plus Make-up Charitable Remainder Unitrust with a flip provision. B and C were the income beneficiaries and D was the remainder beneficiary of A. On Date X, B and C decided it was in their best interests, and that of D's, to terminate A early and distribute the remainder to E, a supporting organization to D. Therefore, B and C modified A to list E as the sole remainder beneficiary, replacing D.
PLR
200902012 Service Permits Division of CRT:
Husband and Wife (H and W) created a charitable remainder unitrust (Trust) on date X. Upon receipt of a dissolution of marriage decree, H and W obtained permission from the Superior Court to divide Trust into two separate trusts subject to receiving a favorable letter ruling from the Service.
PLR
200912036 CRT Early Termination Not Self-Dealing:
B and C established a net-income-plus-makeup charitable remainder unitrust (NIMCRUT), A, to pay for the lives of B, C, D and E. Payments are to be distributed first to B and C for their joint lives and the survivor, and then to D and E in equal shares until the death of the survivor.
PLR
201249002 Donor Is Entitled to Deduction for Donation of CRT Payment to Charity:
Donor and Spouse created a charitable remainder trust ("Trust") under the laws of State. Trust provided an annual payment to Donor and Spouse ("Trust Payment"). Spouse died leaving Donor as sole trustee of trust and sole beneficiary of Trust Payment.
PLR
9550026 Gift of Portion of Unitrust Income Interest:
In PLR 9550026 the donors had previously created a charitable remainder unitrust. Since the trust had grown substantially, they thought that their desire to make a $1,000,000 gift to a university could be accomplished by giving 20% of their interest in the trust. The Service allowed them to give an undivided 20% of their income interest and receive a tax deduction for that value, based on a factor calculated using their ages and 20% of trust fair market value on the date of the gift. Since the university was the remainder recipient and now held both the income and remainder interests in the 20% of the trust that equaled $1,000,000, that amount could be severed from the trust and used to fund the new building.
PLR
9721014 Gift of Unitrust Income Interest:
When a unitrust is created, the donors retain the rights to an income interest and the charity receives irrevocably the remainder interest. This income interest retained by donors is a property right under state law and thus should be transferable like any other property rights. The Service allowed the donors to transfer their income interest to the remainder recipient. When the income interest is transferred, since it is their only interest in the trust, there will be a charitable deduction under Sec. 170 of the Code for the value of the income interest gifted. To calculate that interest, run the unitrust again with the value on the date of the gift of income interest. The deduction is the income value. For example, if the trust was originally $400,000, but has grown to $500,000, run the deduction with the $500,000 value, the current date and the current Rate of the Month. If the remainder value is $200,000, their deduction is $300,000. The $500,000 total value less the $200,000 remainder value equals the $300,000 gift deduction. This is of course an appreciated-type gift deductible to 30% of AGI. Since the charity now owns both the income and the remainder interest, under the doctrine of merger, the trust no longer exists and the charity may use the trust principal for appropriate charitable purposes.