Wills and Trusts

Wyatt, Tarrant & Combs, LLP

Charitable Deduction Allowed for Undivided Interest in a Unitrust Payment

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In PLR 201249002 spouses created a two-life charitable remainder unitrust. They proposed to irrevocably designated a particular charity as the remainder beneficiary of an undivided interest in the trust and then to contribute an identical undivided interest in the unitrust interest to the same charity. The ruling notes that the taxpayers stipulated that when the charity received the unitrust interest, and was the irrevocable remainder beneficiary, those interests would merge for state law purposes and the trustee (who was also the donor spouse) would distribute outright to the charity the relevant portion of the CRUT corpus while continuing to hold the remaining corpus under the terms of the CRUT. The taxpayers also stipulated that the portion distributed to the charity would be “fairly representative” of the adjusted basis of the CRUT assets on the date of distribution.

The IRS approved the transaction, ruling that the donors will receive an income tax deduction for the value of the unitrust interest, that the CRUT’s status would continue, and that “[t]o the extent that in prior years the Trust realized capital gain income, and that income was not included in the income of Donor, such capital gain shall not be included in the income of Donor solely because of the transfer of the undivided interest in the unitrust payment to Charity.”

See also PLR 201321012.

Turney P. Berry
Louisville, Kentucky

Author: robmalinesq

I am an estate planning and probate attorney in Memphis, Tennessee.

Leave a reply. Please note that although this blog may be helpful in informing clients and others who have an interest in information privacy and security, it is not intended to be legal advice. The information on this blog also should not be relied upon to form an attorney-client relationship.

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