The amounts payable shall be retroactively determined by using the taxable year, valuation method, and valuation dates which are ultimately adopted by the charitable remainder trust. See subdivision (ii) of this subparagraph for rules relating to retroactive determination of the amount payable under a charitable remainder unitrust. See paragraph (d)(4) of this section for rules relating to the year of inclusion in the case of an underpayment to a recipient and the allowance of a deduction in the case of an overpayment to a recipient.
For purposes of section 664, the trust becomes a charitable remainder trust as soon as it is partially or completely funded. Consequently, unless the trust has unrelated business taxable income, the income of the trust is exempt from all taxes imposed by subtitle A of the Code, and any distributions by the trust, even before it is completely funded, are governed by the rules of section 664. Any distributions made by H's estate, including distributions to a recipient in respect of unitrust amounts, are governed by the rules of subchapter J, chapter 1, subtitle A of the Code other than section 664.
1.0 minus 0.814506 (factor at 5 percent for 4 years) | 0.185494 |
1.0 minus 0.857375 (factor at 5 percent for 3 years) | .142625 |
Difference | .042869 |
181 ÷ 365=X÷ 0.042869 | |
X = 0.021258 | |
1.0 minus 0.857375 (factor at 5 percent for 3 years | 0.142625 |
Plus: X | .021258 |
Interpolated factor | .163883 |
Thus, the amount payable for the period from January 1, 1974, to June 30, 1977, is $16,388.30 ($100,000 * 0.163883). Thereafter, the trust assets must be valued on December 31 of each year and 5 percent of such value paid annually to W for her life.
Interest income | $80 |
Qualified dividend income | 50 |
Capital gains and losses | 0 |
Tax-exempt income | 0 |
Interest income | $80 |
Qualified dividend income | 20 |
Interest income class | $5 |
Qualified dividend income class ($10 from 2004 and $30 carried forward from 2003) | 40 |
Net short-term capital gain class | 15 |
Net long-term capital loss in 28-percent class | (325) |
Net long-term capital gain in unrecaptured section 1250 gain class | 175 |
Net long-term capital gain in all other long-term capital gain class | 350 |
Interest income | $ 5 |
Qualified dividend income | 40 |
Net short-term capital gain | 15 |
Net long-term capital gain in all other long-term capital gain class | 40 |
Interest income class | $ 5 |
Qualified dividend income | 20 |
Net loss in short-term capital gain class | (50) |
Net long-term capital gain in 28-percent gain class | 10 |
Net long-term capital gain in unrecaptured section 1250 gain class | 135 |
Net long-term capital gain in all other long-term capital gain class (carried forward from 2004) | 160 |
Interest income | $ 5 |
Qualified dividend income | 20 |
Unrecaptured section 1250 gain | 75 |
Interest income class | $ 95 |
Qualified dividend income class | 10 |
Net loss in short-term capital gain class | (20) |
Net long-term capital loss in 28-percent gain class | (350) |
Net long-term capital gain in unrecaptured section 1250 gain class (carried forward from 2005) | 20 |
Net long-term capital gain in all other long-term capital gain class (carried forward from 2005) | 160 |
Interest income | $ 95 |
Qualified dividend income | 5 |
Interest income class | $ 10 |
Net gain in short-term capital gain class | 5 |
Net long-term capital gain in 28-percent gain class | 5 |
Net long-term capital gain in unrecaptured section 1250 gain class | 10 |
Net long-term capital gain in all other long-term capital gain class | 10 |
Interest income | $10 |
Short-term capital gain | 5 |
28-percent gain | 5 |
Unrecaptured section 1250 gain | 10 |
All other long-term capital gain | 10 |
Qualified 5-year gain (taxed as all other long-term capital gain) | 60 |
Example. X transfers $40,000 to a charitable remainder annuity trust which is to pay $3,000 per year to X and $2,000 per year to Y for a term of 5 years. During the first taxable year the trust has $3,000 of ordinary income, $500 of capital gain, and $500 of tax-exempt income after allocation of all expenses. X is treated as receiving ordinary income of $1,800 ($3,000 / $5,000 * $3,000), capital gain of $300 ($3,000 / $5,000 * $500), tax exempt income of $300 ($3,000 / $5,000 * $500), and corpus of $600 ($3,000 / $5,000 * [$5,000 - $4,000]). Y is treated as receiving ordinary income of $1,200 ($2,000 / $5,000 * $3,000), capital gain of $200 ($2,000 / $5,000 * $500), tax exempt income of $200 ($2,000 / $5,000 * $500), and corpus of $400 ($2,000 / $5,000 * [$5,000 - $4,000]).
Example. On January 1, 1971, X creates a charitable remainder annuity trust, whose taxable year is the calendar year, under which X is to receive $5,000 per year. During 1971, the trust receives $500 of ordinary income. On December 31, 1971, the trust distributed cash of $500 and a capital asset of the trust having a fair market value of $4,500 and a basis of $2,200. The trust is deemed to have realized a capital gain of $2,300. X treats the distribution of $5,000 as being ordinary income of $500, capital gain of $2,300 and trust corpus of $2,200. The basis of the distributed property is $4,500 in the hands of X.
See paragraph (d)(4) of this section for rules relating to the year of inclusion in the case of an underpayment to a recipient and the allowance of a deduction in the case of an overpayment to a recipient. A deduction for a transfer to a charitable remainder trust shall not be allowed until the requirements of this paragraph are met and then only if the deduction is claimed on a timely filed return (including extensions) or on a claim for refund filed within the period of limitations prescribed by section 6511(a).
26 C.F.R. §1.664-1
For FEDERAL REGISTER citations affecting § 1.664-1 , see the List of CFR Sections Affected, which appears in the Finding Aids section of the printed volume and at www.govinfo.gov.