2021 national conference on special needs planning and

W2896042DOCX1

2021 National Conference on

Special Needs Planning and

Special Needs Trust

Tax Intensive

Charitable Remainder Trusts

Presented by

Attorney Donna J Jackson

Donna J Jackson amp Associates

Oklahoma City OK

and

Attorney Mark D Munson

Ruder Ware LLSC

Wausau WI

Wednesday October 13 2021

W2896042DOCX1

2021 National Conference on Special Needs Planning

and Special Needs Trusts

Tax Intensive Charitable Remainder Trusts


For many beneficiaries the SECURE Act shortened the distribution period to receive inherited

retirement benefits from ldquolife expectancyrdquo to ten years

The shortened distribution period leads to less deferral of income taxation which is exacerbated

when the beneficiary of inherited retirement benefits is a non-grantor trust due to trusts having

ldquocompressedrdquo income tax brackets when compared to individuals

So please consider with us this problem

Your client Jane Doe a widow and age 83 wants to leave money equally to her three children

who are Joseph Doe (50) Janet Doe (48) and Jake Doe (45) Joseph is not disabled as

determined by the Social Security Administration (not for a lack of trying however) Joseph has

some learning disabilities communication impairments is socially challenged and is

economically challenged Joseph lives with Jane and she is primary caretaker social outlet and

ldquoprotectorrdquo Jane considers Joseph to be a ldquovulnerablerdquo adult Janersquos other two children are

married have children and are independent She has a wonderful relationship with all three of

her children

Jane and her deceased husband (John Doe) worked very hard over the years have done quite

well for themselves and she now has a $3M IRA along with other assets and a considerable

inheritance from her parents Her primary objective with her estate planning is treat all of her

children equally but she wants Josephrsquos share to go ldquoin trustrdquo for Josephrsquos benefit with a third-

party professional trustee

What is the best way for Jane to leave her IRA to Joseph We will explore possible options

answers and solutions to that question in this session

LII gt US Code gt Title 26 gt Subtitle A gt CHAPTER 1 gt Subchapter J gt PART Igt Subpart C gt sect 664

26 US Code sect 664 - Charitable remainder trusts

(a) G Notwithstanding any other provision of this subchapter the provisions ofthis section shall in accordance with regulations prescribed by theSecretary apply in the case of a charitable remainder annuity trust and acharitable remainder unitrust

(b) C

Amounts distributed by a charitable remainder annuity trust or by acharitable remainder unitrust shall be considered as having thefollowing characteristics in the hands of a beneficiary to whom is paidthe annuity described in subsection (d)(1)(A) or the paymentdescribed in subsection (d)(2)(A)

(1) First as amounts of income (other than gains and amountstreated as gains from the sale or other disposition of capital assets)includible in gross income to the extent of such income of the trust forthe year and such undistributed income of the trust for prior years

(2) Second as a capital gain to the extent of the capital gain of thetrust for the year and the undistributed capital gain of the trust for prioryears

(3) Third as other income to the extent of such income of the trust forthe year and such undistributed income of the trust for prior years and

US Code Notes State Regulations

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(4) Fourth as a distribution of trust corpus

For purposes of this section the trust shall determine the amount ofits undistributed capital gain on a cumulative net basis

(c) T

(1) I A charitable remainder annuity trust and a charitable remainderunitrust shall for any taxable year not be subject to any tax imposedby this subtitle

(2) E

(A) In generalIn the case of a charitable remainder annuity trust or a charitableremainder unitrust which has unrelated business taxable income(within the meaning of section 512 determined as if part III ofsubchapter F applied to such trust) for a taxable year there ishereby imposed on such trust or unitrust an excise tax equal to theamount of such unrelated business taxable income

(B) Certain rules to applyThe tax imposed by subparagraph (A) shall be treated as imposedby chapter 42 for purposes of this title other than subchapter E ofchapter 42

(C) Tax court proceedingsFor purposes of this paragraph the references in section 6212(c)(1)to section 4940 shall be deemed to include references to thisparagraph

(d) D

(1) C

For purposes of this section a charitable remainder annuity trust isa trustmdash

(A) from which a sum certain (which is not less than 5 percent normore than 50 percent of the initial net fair market value of allproperty placed in trust) is to be paid not less often than annuallyto one or more persons (at least one of which is not an organizationdescribed in section 170(c) and in the case of individuals only to


an individual who is living at the time of the creation of the trust)for a term of years (not in excess of 20 years) or for the life or livesof such individual or individuals

(B) from which no amount other than the payments described insubparagraph (A) and other than qualified gratuitous transfersdescribed in subparagraph (C) may be paid to or for the use of anyperson other than an organization described in section 170(c)

(C) following the termination of the payments described insubparagraph (A) the remainder interest in the trust is to betransferred to or for the use of an organization described in section170(c) or is to be retained by the trust for such a use or to theextent the remainder interest is in qualified employer securities (asdefined in subsection (g)(4)) all or part of such securities are to betransferred to an employee stock ownership plan (as defined insection 4975(e)(7)) in a qualified gratuitous transfer (as defined bysubsection (g)) and

(D) the value (determined under section 7520) of such remainderinterest is at least 10 percent of the initial net fair market value ofall property placed in the trust

(2) C

For purposes of this section a charitable remainder unitrust is atrustmdash

(A) from which a fixed percentage (which is not less than 5 percentnor more than 50 percent) of the net fair market value of its assetsvalued annually is to be paid not less often than annually to one ormore persons (at least one of which is not an organization describedin section 170(c) and in the case of individuals only to anindividual who is living at the time of the creation of the trust) for aterm of years (not in excess of 20 years) or for the life or lives ofsuch individual or individuals


(C) following the termination of the payments described insubparagraph (A) the remainder interest in the trust is to be


transferred to or for the use of an organization described in section170(c) or is to be retained by the trust for such a use or to theextent the remainder interest is in qualified employer securities (asdefined in subsection (g)(4)) all or part of such securities are to betransferred to an employee stock ownership plan (as defined insection 4975(e)(7)) in a qualified gratuitous transfer (as defined bysubsection (g)) and

(D) with respect to each contribution of property to the trust thevalue (determined under section 7520) of such remainder interest insuch property is at least 10 percent of the net fair market value ofsuch property as of the date such property is contributed to thetrust

(3) E

Notwithstanding the provisions of paragraphs (2)(A) and (B) thetrust instrument may provide that the trustee shall pay the incomebeneficiary for any yearmdash

(A) the amount of the trust income if such amount is less than theamount required to be distributed under paragraph (2)(A) and

(B) any amount of the trust income which is in excess of theamount required to be distributed under paragraph (2)(A) to theextent that (by reason of subparagraph (A)) the aggregate of theamounts paid in prior years was less than the aggregate of suchrequired amounts

(4) S

Ifmdash

(A) any contribution is made to a trust which before thecontribution is a charitable remainder unitrust and

(B) such contribution would (but for this paragraph) result in suchtrust ceasing to be a charitable unitrust by reason of paragraph (2)(D)

such contribution shall be treated as a transfer to a separate trustunder regulations prescribed by the Secretary

(e) V Ads by

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For purposes of determining the amount of any charitable contribution theremainder interest of a charitable remainder annuity trust or charitableremainder unitrust shall be computed on the basis that an amount equal to5 percent of the net fair market value of its assets (or a greater amount ifrequired under the terms of the trust instrument) is to be distributed eachyear In the case of the early termination of a trust which is a charitableremainder unitrust by reason of subsection (d)(3) the valuation ofinterests in such trust for purposes of this section shall be made underrules similar to the rules of the preceding sentence

(f) C

(1) G If a trust would but for a qualified contingency meet the requirementsof paragraph (1)(A) or (2)(A) of subsection (d) such trust shall betreated as meeting such requirements

(2) V For purposes of determining the amount of any charitable contribution(or the actuarial value of any interest) a qualified contingency shall notbe taken into account

(3) Q For purposes of this subsection the term ldquoqualified contingencyrdquo meansany provision of a trust which provides that upon the happening of acontingency the payments described in paragraph (1)(A) or (2)(A) ofsubsection (d) (as the case may be) will terminate not later than suchpayments would otherwise terminate under the trust

(g) Q

(1) I

For purposes of this section the term ldquoqualified gratuitous transferrdquomeans a transfer of qualified employer securities to an employeestock ownership plan (as defined in section 4975(e)(7)) but only tothe extent thatmdash

(A) the securities transferred previously passed from a decedentdying before January 1 1999 to a trust described in paragraph (1)or (2) of subsection (d)


(B) no deduction under section 404 is allowable with respect tosuch transfer

(C) such plan contains the provisions required by paragraph (3)

(D) such plan treats such securities as being attributable toemployer contributions but without regard to the limitationsotherwise applicable to such contributions under section 404 and

(E) the employer whose employees are covered by the plandescribed in this paragraph files with the Secretary a verified writtenstatement consenting to the application of sections 4978 and 4979Awith respect to such employer

(2) E

The term ldquoqualified gratuitous transferrdquo shall not include a transferof qualified employer securities to an employee stock ownershipplan unlessmdash

(A) such plan was in existence on August 1 1996

(B) at the time of the transfer the decedent and members of thedecedentrsquos family (within the meaning of section 2032A(e)(2)) own(directly or through the application of section 318(a)) no more than10 percent of the value of the stock of the corporation referred to inparagraph (4) and

(C) immediately after the transfer such plan owns (after theapplication of section 318(a)(4)) at least 60 percent of the value ofthe outstanding stock of the corporation

(3) P

A plan contains the provisions required by this paragraph if suchplan provides thatmdash

(A) the qualified employer securities so transferred are allocated toplan participants in a manner consistent with section 401(a)(4)

(B) plan participants are entitled to direct the plan as to the mannerin which such securities which are entitled to vote and are allocatedto the account of such participant are to be voted

(C) an independent trustee votes the securities so transferred whichare not allocated to plan participants


(D) each participant who is entitled to a distribution from the planhas the rights described in subparagraphs (A) and (B) of section409(h)(1)

(E) such securities are held in a suspense account under the plan tobe allocated each year up to the applicable limitation underparagraph (7) (determined on the basis of fair market value ofsecurities when allocated to participants) after first allocating allother annual additions for the limitation year up to the limitationunder section 415(c) and

(F) on termination of the plan all securities so transferred whichare not allocated to plan participants as of such termination are tobe transferred to or for the use of an organization described insection 170(c)

For purposes of the preceding sentence the term ldquoindependenttrusteerdquo means any trustee who is not a member of the family(within the meaning of section 2032A(e)(2)) of the decedent or a5-percent shareholder A plan shall not fail to be treated asmeeting the requirements of section 401(a) by reason of meetingthe requirements of this subsection

(4) Q

For purposes of this section the term ldquoqualified employersecuritiesrdquo means employer securities (as defined in section 409(l))which are issued by a domestic corporationmdash

(A) which has no outstanding stock which is readily tradable on anestablished securities market and

(B) which has only 1 class of stock

(5) T 5-

(A) In general

If any portion of the assets of the plan attributable to securitiesacquired by the plan in a qualified gratuitous transfer areallocated to the account ofmdash

(i) any person who is related to the decedent (within themeaning of section 267(b)) or a member of the decedentrsquos family


(within the meaning of section 2032A(e)(2)) or

(ii) any person who at the time of such allocation or at any timeduring the 1-year period ending on the date of the acquisition ofqualified employer securities by the plan is a 5-percentshareholder of the employer maintaining the plan

the plan shall be treated as having distributed (at the time ofsuch allocation) to such person or shareholder the amount soallocated

(B) 5-percent shareholderFor purposes of subparagraph (A) the term ldquo5-percent shareholderrdquomeans any person who owns (directly or through the application ofsection 318(a)) more than 5 percent of the outstanding stock of thecorporation which issued such qualified employer securities or of anycorporation which is a member of the same controlled group ofcorporations (within the meaning of section 409(l)(4)) as suchcorporation For purposes of the preceding sentence section 318(a)shall be applied without regard to the exception in paragraph (2)(B)(i) thereof

(C) Cross referenceFor excise tax on allocations described in subparagraph (A) seesection 4979A

(6) T

If the requirements of paragraph (3)(F) are not met with respect toany securities there is hereby imposed a tax on the employermaintaining the plan in an amount equal to the sum ofmdash

(A) the amount of the increase in the tax which would be imposedby chapter 11 if such securities were not transferred as described inparagraph (1) and

(B) interest on such amount at the underpayment rate undersection 6621 (and compounded daily) from the due date for filingthe return of the tax imposed by chapter 11

(7) A

(A) In general


For purposes of paragraph (3)(E) the applicable limitationunder this paragraph with respect to a participant is an amountequal to the lesser ofmdash

(i) $30000 or

(ii) 25 percent of the participantrsquos compensation (as defined insection 415(c)(3))

(B) Cost-of-living adjustmentThe Secretary shall adjust annually the $30000 amount undersubparagraph (A)(i) at the same time and in the same manner asunder section 415(d) except that the base period shall be thecalendar quarter beginning October 1 1993 and any increase underthis subparagraph which is not a multiple of $5000 shall be roundedto the next lowest multiple of $5000

(Added Pub L 91ndash172 title II sect 201(e)(1) Dec 30 1969 83 Stat 562amended Pub L 94ndash455 title XIX sect 1906(b)(13)(A) Oct 4 1976 90 Stat1834 Pub L 98ndash369 div A title X sect 1022(d) July 18 1984 98 Stat 1029Pub L 105ndash34 title X sect 1089(a)(1) (b)(1) (2) (4) title XV sect 1530(a) (b)(c)(5) Aug 5 1997 111 Stat 960 1075 1078 Pub L 105ndash206 title VIsect 6010(r) July 22 1998 112 Stat 817 Pub L 106ndash554 sect 1(a)(7) [title IIIsect 319(7)] Dec 21 2000 114 Stat 2763 2763Andash646 Pub L 107ndash16 titleVI sect 632(a)(3)(H) June 7 2001 115 Stat 114 Pub L 109ndash280 title VIIIsect 868(a) Aug 17 2006 120 Stat 1025 Pub L 109ndash432 div A title IVsect 424(a) Dec 20 2006 120 Stat 2974 Pub L 114ndash113 div Q title IIIsect 344(a) Dec 18 2015 129 Stat 3115 Pub L 115ndash141 div U title IVsect 401(b)(27) Mar 23 2018 132 Stat 1203)

US Code Toolbox


Law about Articles from WexTable of Popular NamesParallel Table of AuthoritiesHow current is this

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Userid CPM Schema instrx

Leadpct 100 Pt size 95 Draft Ok to Print

AH XSLXML Fileid hellip ionsI52272020AXMLCycle05source (Init amp Date) _______ of 20 1605 - 19-Nov-2020The type and rule above prints on all proofs including departmental reproduction proofs MUST be removed before printing

2020Instructions for Form 5227Split-Interest Trust Information Return

Department of the TreasuryInternal Revenue Service

Section references are to the Internal Revenue Code unless otherwise notedFuture DevelopmentsFor the latest information about developments related to Form 5227 and its instructions such as legislation enacted after they were published go to IRSgovForm5227RemindersQualified business income deduction For tax years beginning after 2017 individual taxpayers and some trusts and estates may be entitled to a deduction of up to 20 of their qualified business income (QBI) from a trade or business including income from a pass-through entity but not from a C corporation plus 20 of qualified real estate investment trust (REIT) dividends and qualified publicly traded partnership (PTP) income The deduction is subject to multiple limitations such as the type of trade or business the taxpayerrsquos taxable income the amount of W-2 wages paid by the trade or business and the unadjusted basis immediately after acquisition (UBIA) of qualified property held by the trade or business The deduction can be taken in addition to the standard or itemized deductions For more information see section 199A Regulations sections 1199A-1 through -6 Forms 8995 and 8995-A and their related instructionsDont include social security numbers on publicly dis-closed forms With the exception of the items described below Form 5227 and its attachments are subject to public disclosure Items not subject to disclosure include Schedule A (and any related early termination agreement) Schedule K-1 any K-1 continuation pages and transmittals the trust agreement trust amendments Form 926 Return by a US Transferor of Property to a Foreign Corporation Form 8582 Passive Activity Loss Limitations Form 8621 Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund and any attachment that references contributor or donor information

General InstructionsPurpose of FormUse Form 5227 tobull Report the financial activities of a split-interest trustbull Provide certain information regarding charitable deductions and distributions of or from a split-interest trust andbull Determine if the trust is treated (for Chapter 42 excise tax purposes) as a private foundation and subject to certain excise taxes under Chapter 42Form 5227 is open to public inspection

Use Schedule A of Form 5227 to reportbull Accumulations of income for charitable remainder trustsbull Distributions to noncharitable beneficiariesrecipients andbull Information about donors and assets contributed during the year

Schedule A of Form 5227 isnt open for public inspectionWho Must FileAll charitable remainder trusts described in section 664 must file Form 5227 All pooled income funds described in section 642(c)(5) and all other trusts such as charitable lead trusts that meet the definition of a split-interest trust under section 4947(a)(2) must file Form 5227 unless the Exception next appliesException A split-interest trust described below isnt required to file Form 5227bull The split-interest trust was created before May 27 1969 andbull All transfers of corpus to the trust occurred before May 27 1969 orbull As to each and every transfer of corpus to the trust made after May 26 1969 no deduction was allowed under any of the sections listed in section 4947(a)(2)

If a split-interest trust created before May 27 1969 receives a contribution to corpus after May 26 1969 for which a deduction is allowed under any of the sections listed in section 4947(a)(2) the trust will cease to qualify for the exception described above In that case the split-interest trust must file Form 5227 for the year when the transfer to corpus occurs and each subsequent year the same as any split-interest trust created after May 26 1969Note Regulations section 16012-3(a)(6) references Form 1041-B Charitable Remainder Trust Form 5227 replaces Form 1041-B Regulations section 16034-1 references Form 1041-A US Information Return Trust Accumulation of Charitable Amounts Form 5227 replaces Form 1041-A for split-interest trustsWhich Parts To CompleteThe term ldquosplit-interest trustrdquo refers to trusts of various types See the Definitions section of these instructions below Certain parts of Form 5227 apply exclusively to a particular type of split-interest trust (such as a charitable remainder trust also referred to as a ldquosection 664 trustrdquo) Parts or lines that apply exclusively to a particular type of split-interest trust are identified in these instructions and on Form 5227 with a parenthetical identifying the type of trust to which the part or line applies Parts or lines that arent indicated as applying to a particular type of split-interest trust should be completed by every type of split-interest trust with one exception Parts VI-A and VI-B arent completed by a charitable remainder or charitable lead trust whose charitable interests involve only war veterans posts or cemeteries (as described in sections 170(c)(3) and 170(c)(5))DefinitionsSplit-interest trust A split-interest trust is a trust thatbull Is not exempt from tax under section 501(a)

Nov 19 2020 Cat No 13228E

Page 2 of 20 Fileid hellip ionsI52272020AXMLCycle05source 1605 - 19-Nov-2020The type and rule above prints on all proofs including departmental reproduction proofs MUST be removed before printing

bull Has some unexpired interests that are devoted to purposes other than religious charitable or similar purposes described in section 170(c)(2)(B) andbull Has amounts transferred in trust after May 26 1969 for which a deduction was allowed under one of the sections listed in section 4947(a)(2)

A split-interest trust is subject to many of the same requirements and restrictions that are imposed on private foundations

The most common forms of a split-interest trust include the followingCharitable lead trust This is a split-interest trust that annually pays a fixed annuity or unitrust amount to a charitable organization for the lead period specified in the trust instrument The lead period may be a term of years or it may be a period determined by the lifetime of one or more individuals as described in Regulations sections 1170A-6(c) 202055-2(e)(2)(vi) and (vii) and 252522(c)-3(c)(2)(vi) and (vii) The donor to the trust will have been allowed a deduction under one of the sections listed in section 4947(a)(2) At the end of the lead period annual payments to the charitable organization cease and the remaining corpus becomes payable outright or in trust to a noncharitable (private) beneficiaryCharitable remainder annuity trust (CRAT) This is a split-interest trust described in section 664(d)(1) It pays a fixed dollar (annuity) amount at least annually to one or more recipients at least one of which isnt a charitable organization The annuity amount must be at least 5 but cannot exceed 50 of the initial net fair market value (FMV) of all property contributed to corpus subject to the further requirement that the remainder interest in the trust (measured at the time property is transferred to the trust) must have a value of at least 10 of the FMV of the initial trust corpus Payments to the recipient continue for a period of years The period if stated as a specific number cannot exceed 20 years The period can also be determined by the lifespan of one or more recipients Whether the period is a fixed number of years or is measured by an individualrsquos lifespan the value of the remainder interest must be at least 10 of the FMV of the property transferred to the trust (as explained above) Upon termination of the recipientrsquos entitlement to the annuity amount the remainder interest is transferred to or is used by a charitable organization described in section 170(c) or qualified employer securities are transferred to an employee stock ownership planCharitable remainder unitrust (CRUT) This is a split-interest trust described in section 664(d)(2) It is similar in many respects to a CRAT except that the amount payable to the recipient annually (the unitrust amount) is a fixed percentage (not less than 5 but not more than 50) of the net FMV of the trustrsquos assets subject further to the requirement described above that the remainder interest must have a value of at least 10 of the value of the initial trust corpus determined at the time property is transferred to the trust Because the unitrust amount is calculated annually based upon the FMV of trust corpus and isnt a fixed amount determined upon the creation of the trust the trustee must determine the FMV of the assets of the trust annually Upon termination of the recipientrsquos entitlement to payments of the unitrust amount the remainder interest is transferred to or is used by a charitable organization described in section 170(c) or qualified employer securities are transferred to an employee stock ownership plan The trust agreement for a CRUT may allow the trustee to distribute less than the full

unitrust amount in years when the trust income (as defined under section 643(b)) is less than the unitrust amount A Net-Income Makeup Charitable Remainder Unitrust (NIMCRUT) is a charitable remainder unitrust that allows payment of the unitrust amount to be deferred in years when the unitrust amount exceeds trust income with the deferred distributions being made up in a later year when the trust has sufficient income A Net Income Charitable Remainder Unitrust (NICRUT) is a charitable remainder unitrust that allows for deferral of the unitrust payment (as described above) but does not provide for deferred distributions to be made up in future yearsNote The terms ldquosection 664 trustrdquo and ldquoCRTrdquo are general references to charitable remainder trusts These terms include CRATs and CRUTsPooled income fund This is a split-interest trust described in section 642(c)(5) which is created and administered by a charitable organization described in section 170(b)(1)(A) (other than in clauses (vii) or (viii)) Donors to the fund receive a lifetime income interest based upon the rate of return earned by the trust (or such other rate as may be prescribed for a trust in existence for less than 3 years) Upon the death of the donor and the termination of his or her income interest the charitable organization becomes entitled to the portion of the trust corpus attributable to the donorrsquos contribution free of trustRecipient A recipient is a beneficiary who receives the possession or beneficial enjoyment of the unitrust or annuity amountFoundation manager A foundation manager is an officer director or trustee (or an individual who has powers or responsibilities similar to those of officers directors or trustees) In the case of any act or failure to act the term ldquofoundation managerrdquo may also include an employee of the trust who has the authority to actDisqualified person A disqualified person is

1 A substantial contributor2 A foundation manager3 A person who owns more than 20 of a corporation

partnership trust or unincorporated enterprise which is itself a substantial contributor

4 A member of the family of an individual in the first three categories or

5 A corporation partnership trust or estate in which persons described in (1) (2) (3) or (4) above own a total beneficial interest of more than 35

6 For purposes of section 4943 (excess business holdings) a disqualified person also includes a A private foundation which is effectively controlled

(directly or indirectly) by the same persons who control the trust in question or

b A private foundation substantially all of the contributions to which were made (directly or indirectly) by the same person or persons described in (1) (2) or (3) above or members of their families within the meaning of section 4946(d) who made (directly or indirectly) substantially all of the contributions to the trust in question

7 For purposes of section 4941 (self-dealing) a disqualified person also includes certain government officials (See section 4946(c) and the related regulations)

-2- Instructions for Form 5227


Photographs of Missing ChildrenThe Internal Revenue Service is a proud partner with the National Center for Missing amp Exploited Childrenreg (NCMEC) Photographs of missing children selected by the Center may appear in instructions on pages that would otherwise be blank You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a childPhone HelpIf you have questions andor need help completing this form please call 877-829-5500 This toll-free telephone service is available Monday through FridayAdditional InformationFor additional information on private foundations and foundation managers visitIRSgovcharitiesnon-profitsprivate foundationsOther Forms You May Have To FileYou may also be required to file one or more of the following formsbull Form 56 Notice Concerning Fiduciary Relationshipbull Form 1041 US Income Tax Return for Estates and Trustsbull Form 1041-ES Estimated Income Tax for Estates and Trustsbull Form 4720 Return of Certain Excise Taxes Under Chapters 41 and 42 of the Internal Revenue Codebull Form 8275 Disclosure Statement Use this form to disclose items or positions (except those contrary to a regulationmdashsee Form 8275-R next) that arent otherwise adequately disclosed on the tax return The disclosure is made to avoid parts of the accuracy-related penalty for disregard of rules or substantial understatement of tax Form 8275 is also used for disclosures relating to preparer penalties for understatements due to unrealistic positions or for willful or reckless conductbull Form 8275-R Regulation Disclosure Statement Use this form to disclose any item on a tax return for which a position has been taken that is contrary to Treasury regulationsbull Form 8822-B Change of Address or Responsible PartymdashBusinessbull Form 8868 Application for Automatic Extension of Time To File an Exempt Organization Returnbull Form 8870 Information Return for Transfers Associated With Certain Personal Benefit Contractsbull Form 8886 Reportable Transaction Disclosure Statement

Getting tax forms instructions and publications Visit IRSgovForms to download current and prior-year forms instructions and publications

Ordering tax forms instructions and publications Go to IRSgovOrderForms to order current forms instructions and publications call 800-829-3676 to order prior-year forms and instructions Your order should arrive within 10 business daysPeriod To Be Covered by ReturnFile Form 5227 for each calendar year This revision of the form is for the 2020 calendar yearAccounting MethodsTrust income must be computed using the method of accounting regularly used in keeping the trusts books and records Generally permissible methods include the cash

method the accrual method or any other method authorized by the Internal Revenue Code The method used must clearly reflect income

Unless otherwise allowed by law the trust may not change the accounting method used to report income (for income as a whole or for any material item) without first getting consent on Form 3115 Application for Change in Accounting Method See Pub 538 Accounting Periods and Methods for more detailsWhen To FileFile Form 5227 for calendar year 2020 by April 15 2021 In the case of a final short-year period the return is due by the 15th day of the 4th month following the date of the trusts terminationExtension of time to file Use Form 8868 to request an automatic extension of time to file The request for an automatic extension must be filed by the due date of the returnWhere To FileUS address If you use the US Postal Service and are located in the United States file Form 5227 at the following address

Department of the TreasuryInternal Revenue Service CenterOgden UT 84201-0027

Outside the United States If you use a designated Private Delivery Service (or are located outside the United States in a foreign country or a US possession) file Form 5227 at this address

Internal Revenue Service Center1973 Rulon White BlvdMS 6054Ogden UT 84201

Private delivery services (PDSs) Tax-exempt organizations can use certain PDSs designated by the IRS to meet the ldquotimely mailing as timely filingrdquo rule for tax returns Go to IRSgovPDS for the current list of designated services

The PDS can tell you how to get written proof of the mailing date

PDSs deliver toInternal Revenue Service Center1973 Rulon White BlvdMS 6054Ogden UT 84201

PDSs canrsquot deliver items to PO boxes You must use the US Postal Service to mail any item to an IRS PO box address

Penalty for Failure To File Timely Completely or CorrectlyThe failure-to-file penalty under section 6652(c)(2)(C) is imposed on a split-interest trust unless the failure is due to reasonable cause The penalty is imposed on the trust for failure tobull Timely file a return

CAUTION

Instructions for Form 5227 -3-


bull File a complete return orbull Furnish correct information

The penalty is $20 for each day the failure continues with a maximum of $10500 for any one return However if the trust has gross income greater than $271000 the penalty is $105 for each day the failure continues with a maximum of $54000 for any one return

The IRS may make a written demand that the delinquent return be filed or information be furnished specifying a time to comply with the demand If the trustee fails to comply with the demand by the specified date the trustee will be charged a penalty of $10 for each day the failure continues with a maximum of $5000 for any one return

If the trustee required to file the return knowingly fails to file the return the same penalty that is imposed on the trust will also be imposed on such trustee Also penalties for filing a false or fraudulent return applyTrust InstrumentWhen you file the first return for a charitable remainder annuity trust or unitrust or charitable lead annuity or unitrust include

1 A copy of the trust instrument and2 A written declaration under penalties of perjury that it is

a true and complete copyFor sample forms of trusts that meet the requirements of a

charitable remainder unitrust see Rev Procs 2005-52 through 2005-59 2005-2 CB 326 339 353 367 383 392 402 and 412

For sample forms of trusts that meet the requirements of a charitable remainder annuity trust see Rev Procs 2003-53 through 2003-60 2003-2 CB 230 236 242 249 257 262 268 and 274

For sample forms of trusts that meet the requirements of an inter vivos grantor or nongrantor charitable lead annuity trust see Rev Proc 2007-45 2007-29 IRB 89 For a sample form of a trust that meets the requirements of a testamentary charitable lead annuity trust see Rev Proc 2007-46 2007-29 IRB 102 and Rev Proc 2016-42 2016-2 CB 269Rounding Off to Whole DollarsYou may round off cents to whole dollars on your return and attached statements If you do round dollars you must round all amounts To round drop amounts under 50 cents and increase amounts from 50 to 99 cents to the next dollar For example $139 becomes $1 and $250 becomes $3

If you have to add two or more amounts to figure the amount to enter on a line include cents when adding the amounts and round off only the totalAttachmentsIf you need more space attach separate sheets showing the same information in the same order as on the printed form Show the totals on the printed form

Enter the trusts name and employer identification number on each sheet Also use sheets that are the same size as the forms and indicate clearly the line of the printed form to which the information relates

Specific InstructionsIdentification AreaComplete the information called for at the top of the form exactly as it appears on Form SS-4 Application for Employer Identification Number The name of the person or institution currently serving as trustee and the trusteersquos current address should be entered in the lines below the name of the trustAddressInclude the suite room or other unit number after the street address If the Post Office does not deliver mail to the street address and the trustee has a PO box show the box number instead

If you receive mail for the trust in care of a third party (such as an accountant or an attorney) enter on the street address line ldquoCOrdquo followed by the third partys name and street address or PO boxA Employer Identification Number (EIN)Every trust that completes this return must have an EIN You can use one of the following methods to apply for an EINbull OnlinemdashGo to IRSgovEIN The EIN is issued immediately once the application information is validatedbull By mailing or faxing Form SS-4Note The online application process isnt yet available for trusts with addresses in foreign countriesB Type of EntityCheck the appropriate box to indicate the type of trust See Definitions in the General Instructions earlier for detailed descriptions of the types of split-interest trusts that file Form 5227D Gross IncomeEnter the trusts gross income for the tax year Gross income is all income from whatever source derived includingbull Interestbull Dividendsbull Rents (such as the amount on line 3 of Schedule E (Form 1040))bull Royalties (such as the amount on line 4 of Schedule E (Form 1040))bull Gross income derived from business (such as the amount on line 7 of Schedule C (Form 1040)) andbull Gains (not losses) derived from dealings in property (figured on each transaction)E Initial Return Final Return Amended Return or Change of Name or AddressInitial return Check this box if this is the initial return for the split-interest trust Charitable remainder trusts must also complete line 93 and attach a copy of the trust instrumentFinal return Check this box if this is a final return because the trust has terminated If the trust or a recipients interest in the trust has terminated check the ldquoFinal K-1rdquo box at the top of the Schedule K-1 (Form 1041)

For charitable remainder trusts If you check the final return box be sure to answer the questions for lines 95andashc and complete line 31 if you answered ldquoYesrdquo to line 95b



Amended return If you are filing an amended 2020 Form 5227 check the ldquoAmended returnrdquo box Complete the entire return and correct the appropriate lines with the new information On an attachment explain the reason for the changes and identify the lines and amounts being changed

For charitable remainder trusts If the amended return results in a change to income or a change in distribution of any income or other information provided to a recipient an amended Schedule K-1 (Form 1041) must be filed with the amended Form 5227 and a copy given to each recipient Check the ldquoAmended K-1rdquo box at the top of the Schedule K-1 (Form 1041)Change of name or address If there has been a change in the trustees name or address from the one used on the prior years return (including a change to an ldquoin care ofrdquo name and address) check the appropriate box(es)

If the address shown on Form 5227 changes after you file the form (including a change to an ldquoin care ofrdquo name and address) file Form 8822-B to notify the IRS of the changeG Unrelated Business Taxable Income (Section 664 trust only)If a charitable remainder trust has any unrelated business taxable income (within the meaning of section 512 and related regulations) for 2020 the trust is liable for a tax under section 664(c)(2) which is treated as a Chapter 42 excise tax The amount of the excise tax is equal to the amount of the trusts unrelated business taxable income If the trust has any unrelated business taxable income answer ldquoYesrdquo to Item G and file Form 4720 in addition to Form 5227 to report the trusts unrelated business taxable income and the tax duePart I Income and DeductionsSection AmdashOrdinary IncomeReport the trusts ordinary income on lines 1 through 7Line 1 Interest income Report all taxable interest income that was received by the trust Examples of taxable interest include interest frombull Accounts (including certificates of deposit and money market accounts) with banks credit unions and thriftsbull Notes loans and mortgagesbull US Treasury bills notes and bondsbull US savings bondsbull Original issue discount andbull Income received as a regular interest holder of a real estate mortgage investment conduit (REMIC)

For taxable bonds acquired after December 31 1987 amortizable bond premium is treated as an offset to the interest income instead of as a separate interest deduction See Pub 550 Investment Income and ExpensesLine 2a Ordinary dividends Enter on line 2a the total of all ordinary dividends including the qualified dividends reported on line 2bLine 2b Qualified dividends Report on this line all qualified dividends received by the trust In general a qualified dividend is a dividend received during the tax year from (a) a domestic corporation or (b) a qualified foreign corporation A qualified dividend does not include any dividend from a corporation if the corporation is (or was) exempt from income tax under section 501 or 521 for the corporations current or preceding tax year during which the distribution was made

Generally these dividends are reported to the trust in box 1b of Form(s) 1099-DIV Dividends and Distributions

Qualified dividends are treated as a separate class of ordinary income for purposes of ordering distributions See Ordering Rules for Ordinary Income later for more information on distributions See Pub 550 for additional information on qualified dividends including holding period requirementsLine 3 Business income or (loss) If the trust operated a business report the income and expenses on Schedule C (Form 1040) Profit or Loss From Business Enter the net profit or loss from Schedule C on line 3 (Section 664 trusts see G Unrelated Business Taxable Income earlier)Line 4 Rents royalties partnerships other estates and trusts etc Use Schedule E (Form 1040) Supplemental Income and Loss to report the trusts income or losses from rents royalties partnerships S corporations other estates and trusts and REMICs Enter the net profit or loss from Schedule E on line 4 See the Instructions for Schedule E (Form 1040) for reporting requirements If the trust received a Schedule K-1 from a partnership S corporation or other flow-through entity use the corresponding lines on Form 5227 to report the interest dividends capital gains etc from the flow-through entity (Section 664 trusts see G Unrelated Business Taxable Income earlier)Line 5 Farm income or (loss) If the trust operated a farm use Schedule F (Form 1040) Profit or Loss From Farming to report farm income and expenses Enter the net profit or loss from Schedule F on line 5 (Section 664 trusts see G Unrelated Business Taxable Income earlier)Note If the trust has farm rental income and expenses based on crops or livestock produced by a tenant report the income and expenses on Schedule E (Form 1040) and include it on line 4 Dont use Form 4835 Farm Rental Income and Expenses or Schedule F (Form 1040) to report such income and expenses and dont include the net profit or (loss) from such income and expenses on line 5Line 6 Ordinary gain or (loss) Enter from Form 4797 Sales of Business Property the gain or loss from the sale or exchange of property (other than capital assets) and also from involuntary conversions (other than casualty or theft) For more information see the Instructions for Form 4797Line 7 Other income List any other item and its amount that is includible in gross income but not included on lines 1 through 6 (or Section B) on the dashed line to the left of the entry space If more space is needed attach a statement Enter the total of these items in the entry space to the rightSection BmdashCapital Gains (Losses)Use Schedule D (Form 1041) Capital Gains and Losses as directed below You may also need to complete Form 8949 Sales and Other Dispositions of Capital Assets Lines 15 and 16 of Schedule D (Form 1041) only apply to a charitable remainder trust (section 664 trust)Line 9 Total short-term capital gain or (loss) Complete lines 1a through 5 and line 7 of the 2020 Schedule D (Form 1041) Dont make an entry on line 6 of Schedule D (Form 1041) Enter the amount from line 7 of the Schedule D (Form 1041) on line 9Line 10 Total long-term capital gain or (loss) Complete lines 8a through 14 and line 16 of the 2020 Schedule D (Form 1041) Dont make an entry on line 15 of Schedule D



(Form 1041) Enter the amount from line 16 of Schedule D (Form 1041) on line 10

For section 664 trusts only Line 10 is the total of all classes (described below) of long-term capital gain The following is a summary of the classesbull 28 long-term capital gain class This class consists of collectibles gains and losses and the taxable gain (but not more than the section 1202 exclusion) on the sale or exchange of qualified small business stock Enter these gains or losses on line 12bull Section 1250 long-term capital gain class This class consists of unrecaptured section 1250 gain (generally the part of real estate capital gain attributable to depreciation) on sales exchanges etc of assets held more than 1 year Undistributed unrecaptured section 1250 gain on sales exchanges etc after May 6 1997 is included in this class Enter this gain on line 11bull All other long-term capital gain class This class consists of all other gains or losses from sales exchanges and conversions (including installment payments received) of assets held more than 12 monthsSection CmdashNontaxable IncomeIn this section include other income that isnt included in Section A or B This section includes income excluded under Subtitle A Chapter 1 Subchapter B Part III of the Internal Revenue Code such as interest on state and municipal bondsSection DmdashDeductionsFor Section 664 TrustsInclude all allowable deductions and any expense that would be allowable but for the fact that it must be allocated to tax-exempt income No deduction is ever allowed forbull The personal exemption under section 151 (see section 642(b))bull Charitable contributions under section 170(a) (see section 642(c))bull Net operating losses under section 642(d)bull Income distribution deductions under section 661bull Capital loss carryforwards under section 1212bull Federal income taxes orbull Federal excise taxes under Chapter 42

Any expense that isnt deductible in determining taxable income (or not otherwise deductible but for the fact that it must be allocated to nontaxable income) must be allocated to corpus

For Split-Interest Trusts Other Than Section 664 TrustsInclude all expenses attributable to gross income that are deductible for the tax yearAttached statement List any other deductible expense that is attributable to the gross income of the trust and isnt included on lines 17 through 20 and line 23 and show the amount of the deduction Total the amounts listed and enter the total on line 21

Line 23 Charitable DeductionEnter the amount of any charitable deduction or other deduction taken under section 642(c) for the tax year

Section EmdashDeductions Allocable to Income Categories (Section 664 trust only)Deductions are allocated as follows

1 Allowable deductions directly attributable to one or more classes of income items (that is interest dividends or rents) or corpus are allocated to such income classes or corpus

2 Allowable deductions not allocated under (1) above are allocated on the basis of gross income after directly attributable deductions to the extent of such income

3 Deductions not allocated under either (1) or (2) above may be allocated in any manner

Add the deductions that were allocated to all the classes of income items within each category and enter the amount on the appropriate line (Note Any deduction allocated to corpus isnt shown on any line in Section E)

For a discussion on the allocation of deductions to tax-exempt income see Allocation of Deductions for Tax-Exempt Income in the Instructions for Form 1041Part II Schedule of Distributable Income (Section 664 trust only)Report the income (both current and cumulative undistributed income) of the trust for purposes of determining the character of distributions in three categories

1 Ordinary income2 Capital gains and losses3 Nontaxable incomeA loss in any one of the three categories may not be used

to reduce a gain in any other category For example a capital loss may not be used to reduce ordinary income However a loss in any one category may be used to reduce undistributed gain for earlier years within that same category and any excess may be carried forward to reduce gain in future years within that same category

For information on recordkeeping for long-term capital gains or ordinary income see the Capital Gains Distribution Worksheet or the Ordinary Income Distribution Worksheet laterNet investment income (NII) Beginning in 2013 charitable remainder trusts must begin tracking Excluded Income and NII received and distributed For 2013 and later years columns (a) (b) and (c) of Part II line 27 have been divided into NII and Excluded Income

The term ldquoExcluded Incomerdquo is income received (or losses incurred) by the charitable remainder trust not taken into account in computing NII For charitable remainder trusts (CRTs) in existence before 2013 all undistributed income as of the end of 2012 is Excluded Income For 2013 and later years the CRT must determine whether the items of income gain loss and deduction reported on sections A through D of Part I constitute NII or Excluded IncomeLine 27 Enter the amounts of undistributed Excluded Income and undistributed accumulated NII from post-2012 tax yearsLine 28 Allocate the items of income or loss from the current year between Excluded Income and NII



The allocation of items of income or loss from the current year between Excluded Income and NII should be reported on line 28 after the application of

the gain and loss netting rules outlined in Part II-A of Schedule A later In certain situations NII losses may reduce Excluded Income due to the netting rules Therefore those rules should be applied before entering amounts on line 28

Note If the CRT elects to use the Simplified Net Investment Income Calculation then report all income or loss from Part I in the Excluded Income column and leave the NII column empty See the instructions for the Simplified Net Investment Income Calculation Election in Part I-B of Schedule A laterPart III-A Distributions of Principal for Charitable PurposesLine 31 Provide the information requested for columns A through C and enter the amount on the line to the right In column C list in sufficient detail each class of activity for amounts paid out of principal to the same payee for charitable purposes

Examples ldquoCash payments to buy library materialrdquo or ldquoGrant paid in cash to equip the chemistry lab at Magnolia Universityrdquo

Dont merely enter the category (that is religious charitable scientific literary or educational) The purpose of the deduction must be entered as shown in the examples abovePart III-B Accumulated Income Set Aside and Income Distributions for Charitable PurposesComplete Part III-B if any of the following applybull The trust claimed a deduction in a prior year under section 642(c) for an amount permanently set aside and at the beginning of the year the set aside amount was not fully distributedbull The trust claimed a deduction during the year under section 642(c) whether the amount was set aside or paidbull The trust made payment for charitable purposes during the year but claimed the section 642(c) deduction in the prior yearbull The trust is treated as a grantor trust and made a payment for charitable purposes during the year and the grantor (during the year or a prior year) claimed a charitable deduction as described in Regulations section 1170A-6(c) upon contribution to the trustNote The grantor trust completes only lines 35 and 36 for this partLine 35 Provide the information requested for columns A through C and enter the amount on the line to the right In column C list in sufficient detail each class of activity to the same payee for charitable purposes for amounts distributed in which a section 642(c) deduction was claimed

Dont merely enter the category (that is religious charitable scientific literary or educational) The purpose of the deduction must be entered as shown in the examples in Part III-A

CAUTION Part IV Balance Sheet

Complete the balance sheet using the accounting method the trust uses in keeping its books and records All filers must complete columns (a) and (b) Also all charitable remainder unitrusts must complete column (c) A charitable lead unitrust may but isnt required to show the FMV of its assets in column (c)

Enter the end-of-year book value where space is provided to the left of column (a) to report receivables and the related allowance for doubtful accounts or depreciable assets and accumulated depreciation Enter the net amounts in column (b)Column (c)In computing the net FMV of the unitrusts assets take into account all assets and liabilities without regard to whether particular items are taken into account in determining the income of the trust The net FMV of the trusts assets may be determined on any one date during the tax year of the trust or by taking the average of valuations made on more than one date during the tax year of the trust as long as the same valuation date or dates and valuation methods are used each year See Regulations section 1664-3Line 38 Cashmdashnon-interest-bearing Enter the amount of cash on deposit in checking accounts deposits in transit change funds petty cash funds or any other non-interest-bearing account Dont include advances to employees or officers or refundable deposits paid to suppliers or othersLine 39 Savings and temporary cash investments Enter the total of cash in savings or other interest-bearing accounts and temporary cash investments such as money market funds commercial paper certificates of deposit US Treasury bills or other governmental obligations that mature in less than 1 yearLine 40 Accounts receivable Enter the total accounts receivable (reduced by the corresponding allowance for doubtful accounts) that arose from the sale of goods andor the performance of services Claims against vendors or refundable deposits with suppliers or others may be reported here if not significant in amount (Otherwise report them on line 49) Any receivables due from officers directors trustees foundation managers or other disqualified persons must be reported on line 41 Receivables (including loans and advances) due from other employees should be reported on line 49Line 41 Receivables due from officers directors trust-ees and other disqualified persons Enter here (and in an attached statement described below) all receivables due from officers directors trustees and other disqualified persons and all secured and unsecured loans (including advances) to such persons

Attached statement 1 In the required statement report each loan separately

even if more than one loan was made to the same person or the same terms apply to all loans made

Salary advances and other advances for personal use and benefit and receivables subject to special terms or arising from transactions not functionally related to the trusts charitable purposes must be reported as separate loans for each officer director etc



2 Receivables that are subject to the same terms and conditions (including credit limits and rate of interest) as receivables due from the general public and that arose in connection with an activity functionally related to the trusts charitable purposes may be reported as a single total for all the officers directors etc Travel advances made in connection with official business of the trust may also be reported as a single total

For each outstanding loan or other receivable that must be reported separately the attached statement should use a columnar format and show the following informationbull Borrowers name and titlebull Original amountbull Balance duebull Date of notebull Maturity datebull Repayment termsbull Interest ratebull Security provided by the borrowerbull Purpose of the loan andbull Description and FMV of the consideration furnished by the lender

The above detail isnt required for receivables or travel advances that may be reported as a single total (see instruction (2) above) However report and identify those totals separately in the attachmentLine 42 Other notes and loans receivable Enter the combined total of notes receivable and net loans receivable

Notes receivable Enter the amount of all notes receivable not listed on line 41 and not acquired as investments Attach a statement similar to that called for in the line 41 instructions The statement should also identify the relationship of the borrower to any officer director trustee or other disqualified person

For a note receivable from any section 501(c)(3) organization list only the name of the borrower and the balance due on the required statement

Loans receivable Enter the gross amount of loans receivable less the allowance for doubtful accounts arising from the normal activities of the trust An itemized list of these loans isnt required but attach a statement indicating the total amount of each type of loan outstanding Report loans to officers directors trustees or other disqualified persons on line 41 and loans to other employees on line 49Line 43 Inventories for sale or use Enter the amount of materials goods and supplies purchased or manufactured by the trust and held for sale or use in some future periodLine 44 Prepaid expenses and deferred charges Enter the amount of short-term and long-term prepayments of future expenses attributable to one or more future accounting periods Examples include prepayments of rent insurance and pension costs and expenses incurred in connection with a solicitation campaign to be conducted in a future accounting periodLines 45a b and c InvestmentsmdashUS and state gov-ernment obligations corporate stock and corporate bonds Enter the book value (which may be market value) of these investments Attach a statement that lists each security held at the end of the year and shows whether the security is listed at cost (including the value recorded at the time of receipt in the case of donated securities) or end-of-year market value Dont include amounts shown on line 39 Governmental obligations reported on line 45a are those that

mature in 1 year or more Debt securities of the US Government may be reported as a single total rather than itemized Obligations of state and municipal governments may also be reported as a lump-sum total Dont combine US Government obligations with state and municipal obligations on the attached statementLine 46 InvestmentsmdashLand buildings and equipment Enter the book value (cost or other basis less accumulated depreciation) of all land buildings and equipment held for investment purposes such as rental properties Attach a statement listing these investment fixed assets held at the end of the year and showing for each item or category listed the cost or other basis accumulated depreciation and book valueLine 47 InvestmentsmdashOther Enter the amount of all other investment holdings not reported on line 45 or line 46 Attach a statement describing each of these investments held at the end of the year Show the book value for each and indicate whether the investment is listed at cost or end-of-year market value Dont include program-related investments See the instructions for line 49Line 48 Land buildings and equipment Enter the book value (cost or other basis less accumulated depreciation) of all land buildings and equipment owned by the trust and not held for investment This includes any equipment owned and used by the trust in conducting its charitable activities Attach a statement listing these fixed assets held at the end of the year and showing for each item or category listed the cost or other basis accumulated depreciation and book valueLine 49 Other assets List and show the book value of each category of assets not reportable on lines 38 through 48 Attach a separate statement if more space is needed

One type of asset reportable on line 49 is program-related investments made primarily to accomplish a charitable purpose of the trust rather than to produce incomeLine 50 Total assets Columns (a) and (b) (and column (c) if a unitrust) must always have an entry even if it is zeroLine 51 Accounts payable and accrued expenses Enter the total accounts payable to suppliers and others and accrued expenses such as salaries payable accrued payroll taxes and interest payableLine 52 Deferred revenue Include revenue that the organization has received but not yet earned as of the balance sheet date under its method of accountingLine 53 Loans from officers directors trustees and other disqualified persons Enter the unpaid balance of loans received from officers directors trustees and other disqualified persons For loans outstanding at the end of the year attach a statement that provides (for each loan) the name and title of the lender and the information specified in the line 41 instructionsLine 54 Mortgages and other notes payable Enter the amount of mortgages and other notes payable at the beginning and end of the year Attach a statement showing as of the end of the year the total amount of all mortgages payable and for each nonmortgage note payable the name of the lender and the other information specified in the line 41 instructions The statement should also identify the relationship of the lender to any officer director trustee or other disqualified person



Line 55 Other liabilities List and show the amount of each liability not reportable on lines 51 through 54 Attach a separate statement if more space is needed

Charitable remainder unitrusts must include any unitrust amounts applicable to prior periods that are unpaid but required to be paid as of the valuation date since such amounts reduce the net FMV of the trusts assets However dont include any make-up amount for a NIMCRUTLine 56 Total liabilities Columns (a) and (b) (and column (c) if a unitrust) must always have an entry even if it is zeroLine 60 Total liabilities and net assets Columns (a) and (b) must always have an entry even if it is zeroParts V-A and V-B Charitable Remainder Trust InformationLine 61b To figure the total annual annuity amounts for a short tax year see Short tax years laterLine 65a Enter the unitrust fixed percentage (which may not be less than 5 or more than 50)

If there is more than one unitrust recipient attach a statement showing the percentage of the total unitrust dollar amount payable to each recipient The sum of these individual shares should be 100Line 65b This line must always have an entry even if it is zeroLine 66a Enter the trusts 2020 (fiduciary) accounting income determined under the terms of the governing instrument and applicable local law See section 643(b) and Regulations sections 1664-3(a)(1)(i)(b)(3) and 1643(b)-1 for more informationLine 67a Enter the amount if any from line 69 of the 2019 Form 5227

If the amount entered isnt the same as line 69 from the prior years form attach an explanation and a statement that supports the balance in the make-up account Figure the total deficiencies from previous years as follows

1 Aggregate the unitrusts net asset FMV for each previous year

2 Multiply (1) above by the unitrusts fixed percentage3 From the result in (2) subtract the aggregate trust

income that was distributed for previous yearsLine 69 Use this amount to determine future accrued accumulated distribution deficienciesShort tax years To figure the annuity amount (line 61b) or the unitrust amount (line 68) for short tax years multiply the annuity or unitrust amount by the number of days in the trusts tax year and then divide the result by 365 (or 366 for leap years)

For a unitrust whose governing instrument provides for an income exception if no valuation date occurs before the end of the trusts tax year value the trusts assets as of the last day of the trusts tax yearParts VI-A and VI-B Statements Regarding ActivitiesAnswer every question in these sections If a line does not apply enter ldquoNArdquo

Part VI-ALine 73 A split-interest trust must have a governing instrument that requires the trust to act or refrain from acting so as not to engage in an act of self-dealing under section 4941 or subject it to the excise taxes under section 4943 4944 or 4945 The trust may satisfy the requirements either by express language in its governing instrument or by the operation of state law which imposes the above requirements on the trust or treats these requirements as being contained in the governing instrument If a trust claims it satisfies the requirements of section 508(e) by operation of state law the provisions of state law must effectively impose the requirements of section 508(e) on the trust

If however the state law does not apply to a governing instrument which contains mandatory directions conflicting with any of its requirements and the trust has such mandatory directions in its governing instrument then the trust has not satisfied the requirements of section 508(e) by the operation of that state lawPart VI-BComplete Part VI-B to determine whether the trust has complied with the applicable Chapter 42 rules relating to private foundations and whether the trust trustee disqualified persons or some combination of these may be liable for certain foundation excise taxes These excise taxes includebull The section 4941 tax on self-dealing between the trust and ldquodisqualified personsrdquobull The section 4943 tax on excess business holdingsbull The section 4944 tax on investments that jeopardize the trusts charitable purposes andbull The section 4945 tax on taxable expenditures

The split-interest trust pays these taxes on Form 4720 For a detailed explanation of each of these taxes see the Instructions for Form 4720

The excise taxes on private foundations dont apply to any amounts

1 Payable under the terms of the trust to income beneficiaries unless a deduction was allowed under section 170(f)(2)(B) 2055(e)(2)(B) or 2522(c)(2)(B)

2 In trust for which a charitable contribution deduction was not allowed under any section listed in section 4947(a)(2)(B) if the amounts are segregated from amounts for which a deduction was allowable or

3 Transferred in trust before May 27 1969Line 75 The activities listed on lines 75a(1) through (6) are considered self-dealing under section 4941 unless one of the exceptions described in section 4941(d)(2)(D) (E) (F) or (G) applies You may also access information about self-dealing at IRSgovcharitiesfoundationsindexhtml by clicking on the link for Life Cycle of a Private Foundation

The terms ldquodisqualified personrdquo and ldquofoundation managerrdquo are defined under Definitions earlierLine 75b If you answered ldquoYesrdquo to any of the questions in line 75a you should answer ldquoYesrdquo to line 75b unless all of the acts engaged in were ldquoexceptedrdquo acts Excepted acts are described in Regulations sections 534941(d)-3 and -4 or appear in Notices published in the Internal Revenue Bulletin relating to disaster assistance At the time this form went to print there were no Notices currently in effect relating to disaster assistance for ldquoexceptedrdquo acts to self-dealing



Line 76 Under section 4947(b)(3)(A) a split-interest trust isnt subject to the excess business holdings tax (section 4943) or tax on investments that jeopardize the trusts charitable purpose (section 4944) if all the income interest (and none of the remainder interest) of the trust is devoted solely to one or more of the charitable purposes described in section 170(c)(2)(B) In addition all amounts in the trust for which a charitable contribution deduction was allowed under section 170 (for individual taxpayers) or a similar section for personal holding companies foreign personal holding companies or estates or trusts (including a deduction for estate or gift tax purposes) cannot have a total value of more than 60 of the total FMV of all amounts in the trust For the purposes of section 4947(b)(3)(A) the term ldquoincome interestrdquo includes the right to receive an annuity or unitrust payment as described in Regulations section 534947-2(b)(2)(i)

Under section 4947(b)(3)(B) a split-interest trust isnt subject to the section 4943 or 4944 taxes if a deduction was allowed under section 170 (and related provisions for other entities) for amounts payable under the terms of the trust to every remainder beneficiary but not to any income beneficiary For the purposes of section 4947(b)(3)(B) the term ldquoincome beneficiaryrdquo includes the recipient entitled to receive an annuity or unitrust payment under a CRT as well as the donor entitled to payments from a pooled income fund The term ldquoremainder beneficiaryrdquo includes the charitable organization entitled to the remainder interest under a CRT or a pooled income fundLine 77 In general excess business holdings are the amount of stock or other interest in a business enterprise that the trust must dispose of to a person other than a disqualified person in order for the trusts remaining holdings in the enterprise to be permitted holdings

In general the combined permitted holdings of a trust and all disqualified persons may not be more than 20 of the voting power (or beneficial or profits interest in the case of a trust or a partnership) in any business enterprise

In general a business enterprise means the active conduct of a trade or business including any activity that is regularly conducted to produce income from selling goods or performing services that is an unrelated trade or business under section 513

The term ldquobusiness enterpriserdquo does not include1 A functionally related business defined in section

4942(j)(4) or2 A trade or business if at least 95 of its gross income

is derived from passive sourcesSee section 4943(d)(3)(B) for additional items that are

included in gross income from passive sourcesLine 77a A private foundation isnt treated as having excess business holdings in any enterprise if together with related foundations it owns 2 or less of the voting stock and 2 or less in value of all outstanding shares of all classes of stock A similar exception applies to a beneficial or profits interest in any business enterprise that is a trust or partnershipLine 78 In general an investment which jeopardizes any of the charitable purposes of a trust is one in which a foundation manager did not exercise ordinary business care in making the investment to provide for the long- and short-term financial needs of the trust in carrying out its charitable purposes

For more information on investments that jeopardize charitable purposes see Regulations section 534944-1Line 79 Grants by a trust to a public charity arent taxable expenditures if the grants arent earmarked for use for any of the activities described on lines 79a(1) through (5) and there is no oral or written agreement by which the trust may cause the public charity to engage in any such prohibited activity or to select the grant grantee

Grants made to exempt operating foundations (as defined in section 4940(d)(2)) arent subject to the expenditure responsibility provisions of section 4945 If the trust made grants to such organizations you dont have to file Form 4720 for those grants See the section 4945 regulations for more informationLine 79b If you answered ldquoYesrdquo to any of the questions in line 79a you should answer ldquoYesrdquo to line 79b unless all of the transactions engaged in were ldquoexceptedrdquo transactions Excepted transactions are described in Regulations section 534945 or appear in Notices published in the Internal Revenue Bulletin relating to disaster assistance At the time this form went to print there were no Notices currently in effect relating to disaster assistance for ldquoexceptedrdquo transactions to taxable expendituresLine 80a A personal benefit contract is in general any life insurance annuity or endowment contract that benefits directly or indirectly a transferor a transferors family member or a transferor designee that isnt an organization described in section 170(c)Line 80b Enter the total of all premiums paid by the split-interest trust on any personal benefit contract if the payment of premiums is in connection with a transfer for which a deduction isnt allowed under section 170(f)(10)(A) Also if there is an understanding or expectation that any person will directly or indirectly pay any premium on a personal benefit contract for the transferor include those premium payments in the amount entered on this line For more information see the instructions for Form 8870Part VII Questionnaire for Charitable Lead Trusts Pooled Income Funds and Charitable Remainder TrustsSection AmdashAll TrustsAll trusts are required to answer lines 81 and 82Section BmdashCharitable Lead TrustsLine 83 The information on this line is used to determine whether sections 4943 and 4944 apply for 2020Line 85 Enter the amount for payments described in sections 170(f)(2)(B) 2055(e)(2)(B) and 2522(c)(2)(B)Section CmdashPooled Income FundsLine 87 Upon termination of the income interest retained or created by a donor the trustee is required to sever from the fund an amount equal to the value of the remainder interest in the property upon which the income interest is based The amount severed from the fund must either be paid to or retained for the use of the designated public charity as provided in the governing instrument See Regulations section 1642(c)-5(b)(8) for valuation procedures



Section DmdashCharitable Remainder TrustsLine 91 If a charitable remainder annuity trust or certain charitable remainder unitrusts pay the annuity or unitrust amount after the close of the tax year and

1 The payment is made within a reasonable time after the close of the tax year and

2 To the extent the payment is characterized as corpus from a property distribution (other than cash) the trustee treats any income generated by the distribution as occurring on the last day of the tax year for which the annuity or unitrust amount is due then the annuity trust or certain unitrusts wont be deemed to havebull Engaged in self-dealing (section 4941)bull Unrelated debt-financed income (section 514)bull Received an additional contribution (Regulations sections 1664-2(b) and 1664-3(b)) orbull Failed to function exclusively as a charitable remainder trust (Regulations section 1664-1(a)(4))

See Regulations sections 1664-2(a)(1) and 1664-3(a)(1) for more information

Under Regulations section 1664-1(d)(5) a distribution of property (other than cash) is treated as a sale by the trustNote You must report income (gain) generated by the property distribution (discussed above) on Part I of Form 5227 for the current tax yearTrusts created before December 10 1998 The election in Regulations sections 1664-2(a)(1)(i)(a)(2) and 1664-3(a)(1)(i)(g)(2) does not apply to charitable remainder annuity trusts and certain charitable remainder unitrusts whose annuity or unitrust amount is 15 or lessLine 92 Net investment income tax (NIIT)mdashRegulations section 11411-10(g) election In general a CRT that owns stock of a controlled foreign corporation (CFC) (within the meaning of section 953(c)(1)(B) or 957(a)) or a passive foreign investment company (within the meaning of section 1297(a)) that it treats as a qualified electing fund (QEF) under section 1295 may make the election provided in Regulations section 11411-10(g) For NIIT purposes if an election is in effect with respect to a CFC or QEF then in general the amounts included in income for regular tax purposes under section 951 and section 1293 from the CFC or QEF are also included in NII and distributions of previously taxed income to the CRT from the CFC or QEF described in section 959(d) or 1293(c) are excluded from NII

This election must be made on an entity-by-entity basis and applies only to the particular CFCs and QEFs for which an election is made If the CRT owns a CFC or QEF through certain domestic pass-through entities such as a domestic partnership or common trust fund the domestic pass-through entity may make the election with respect to the CFC or QEF and you will be considered as having made the election If the entity does not make the election you may make the election with respect to the CFC or QEF owned through the entityWhen to make the election The election applies to the tax year for which it is made and later tax years and applies to all interests in the CFC or QEF that the CRT later acquires The CRT cannot revoke the election The election must be made no later than the first tax year beginning after December 31 2013 in which the CRT includes an amount in income for regular tax purposes under section 951(a) or 1293(a) with

respect to the CFC or QEF The election may be made on an original or an amended return provided that the tax year for which the election is made and all tax years affected by the election arent closed by the period of limitations on assessments under section 6501 For more information see Regulations section 11411-10(g)Note CRTs that make the Simplified Net Investment Income Calculation Election may also make the Regulations section 11411-10(g) election See Simplified Net Investment Income Calculation Election in the Instructions for Part I-B of Schedule A later

For more information on the NII treatment of income from certain CFCs and passive foreign investment company (PFIC)s within the section 664 category and class system see Regulations section 11411-10 and Proposed Regulations section 11411-3(d)(2)(ii)Contents of the election In order to make the election the CRT must check the ldquoYesrdquo box on line 92 and must attach a statement to its Form 5227 which must includebull Name of the CRT and its EINbull A declaration that the CRTs elect under Regulations section 11411-10(g) to apply the rules in Regulations section 11411-10(g) to the CFCs and QEFs identified in the statement andbull The following information with respect to each CFC and QEF for which an election is madebull The name of the CFC or QEF andbull Either the EIN of the CFC or QEF or if the CFC or QEF does not have an EIN the reference ID number of the CFC or QEFLine 96 Check the ldquoYesrdquo box and enter the name of the foreign country if either (1) or (2) below applies

1 The trust owns more than 50 of the stock in any corporation that owns one or more foreign bank accounts

2 At any time during the year the trust had an interest in or signature or other authority over a bank securities or other financial account in a foreign countryException Check ldquoNordquo if either of the following applies to the trustbull The combined value of the accounts was $10000 or less during the whole yearbull The accounts were with a US military banking facility operated by a US financial institution

See FinCEN Form 114 Report of Foreign Bank and Financial Accounts (FBAR) and its instructions to determine whether the trust is considered to have an interest in or signature or other authority over a bank securities or other financial account in a foreign country If ldquoYesrdquo electronically file FinCEN Form 114 with the Department of the Treasury using the FinCENs BSA E-Filing System Because FinCEN Form 114 isnt a tax form dont file it with Form 5227 See Fincengov for more information

If you are required to file FinCEN Form 114 but dont you may have to pay a penalty of up to $10000 (more in some cases)

SignatureForm 5227 must be signed by the trustee or by an authorized representative

If you as trustee (or an employee or officer of the trust) fill in Form 5227 the Paid Preparer Use Only space should

CAUTION



remain blank If someone prepares this return without charge that person should not sign the returnPaid preparer Generally anyone who is paid to prepare a tax return for a charitable remainder trust must sign the return and fill in the other blanks in the Paid Preparer Use Only area of the return For all other trusts completion of Form 5227s Paid Preparer Use Only area is optional

If you have questions about whether a preparer is required to sign the return please contact an IRS office

The person required to sign the return as the preparer mustbull Complete the required preparer informationbull Sign it in the space provided for the preparers signature (a facsimile signature is acceptable) andbull Give the trustee a copy of the return in addition to the copy to be filed with the IRS

Enter the paid preparerrsquos PTIN not his or her social security number (SSN) in the ldquoPTINrdquo box in the paid preparerrsquos block Because Form 5227 is publicly

disclosable any information entered in this block will become public For more information about PTINs visit the IRS website at IRSgovPTIN

Schedule AmdashDistributions Assets and Donor InformationNote Schedule A isnt open to public inspectionQualified Business Income DeductionA CRT is not entitled to a qualified business income deduction However a taxable recipient of a unitrust or annuity amount from a CRT may take into account QBI qualified REIT dividends and qualified PTP income received from a CRT to the extent that the unitrust or annuity amount distributed consists of such items For additional information on how to report QBI and other section 199A items to beneficiariesrecipients see the instructions for Schedule K-1 that are found in the Instructions for Form 1041Part I-A Accumulation Schedule (Section 664 trust only)The following information applies to lines 2a and 2bLine 2a Enter the total of all distributions for 2020 on the short line to the immediate right of the ldquo2020rdquoLine 2b Enter the amount distributed from each income categoryPart I-B Simplified Net Investment Income Calculation Election (SNIIC Election) (Section 664 trust only)The CRT may make an election to calculate receipts and distributions of NII using a simplified method that is independent of the section 664 category and class system Once made the SNIIC election is irrevocable If a CRT makes the SNIIC election the CRT computes the NII in the same manner as an individual When using the SNIIC a CRTrsquos accumulated NII is a separate and independent tracking system within the CRT and isnt assigned combined or taken into account in any of the CRTs existing categories (ordinary income capital gain nontaxable income)

CAUTION

Amount of NII Allocable to Income RecipientsIf a CRT makes the SNIIC election distributions from a CRT to a recipient for a tax year consist of NII equal to the lesser of

1 The total amount of the distributions to that recipient for that year or

2 The current and accumulated NII of the CRTWith this election the classification of a distribution as

consisting of NII or Excluded Income is independent from the character of the income distributed to the recipient for regular tax purposes using the section 664 category and class system However see Effect of the SNIIC Election on Netting and Ordering Rules laterCalculation of NIIIn computing the CRTrsquos NII if in a tax year a CRTrsquos properly allocable deductions described in section 1411(c)(1)(B) exceed the gross investment income and net gain described in section 1411(c)(1)(A) then such excess deductions shall reduce the NII for that tax year and to the extent of any remaining excess deductions reduce NII in subsequent tax years of the CRT

Example A CRT has dividend income of $1000 and a long-term capital loss of $10000 in 2019 and $11000 long-term capital gains in 2020 The CRT would have ($9000) of accumulated NII in 2019 so any 2019 distributions to income recipients would not include any NII In 2020 the CRT would have $2000 of NII available for distribution in 2020 and afterNote The SNIIC election is available for the 2020 tax year under Proposed Regulations section 11411-3(d)(3) When finalized Proposed Regulations section 11411-3(d)(3) is proposed to apply to tax years of the CRT beginning after December 31 2012 However if after consideration of all comments received in response to those proposed regulations it appears that there is no significant interest among taxpayers in having the option of using the simplified method the IRS may omit this election from the regulations when finalized If the SNIIC election is omitted the CRT wont have to amend the 2020 return The Instructions for Form 5227 in a later year will describe the actions that the CRT must take to transition from the SNIIC to calculating NII using the section 664 category and class systemWhen To Make the SNIIC Election

CRTs established after December 31 2012 In the case of a CRT established after December 31 2012 a CRT wanting to make the SNIIC election must do so on its Form 5227 return for the tax year in which the CRT is established

CRTs established before January 1 2013 In the case of a CRT established before January 1 2013 the CRT wanting to make the election must do so on its Form 5227 return for its first tax year beginning on or after January 1 2013

Making a SNIIC election on an amended return The CRT may make the election on an amended Form 5227 return for that year only if the tax year for which the SNIIC election is made and all tax years that are affected by the election for both the CRT and its recipients arent closed by the period of limitations on assessments under section 6501



How To Make the SNIIC Election and Completing the Form 5227 With a SNIIC ElectionA CRT makes the SNIIC election bybull Completing lines 27 through 29 of Part II by reporting all income received as Excluded Incomebull Completing lines 1 through 3 of Part I-A of Schedule A by reporting all income distributed as Excluded Incomebull Completing Part I-B of Schedule A (see Instructions for Part I-B of Schedule A later) andbull Reporting the allocable share of NII to recipients consistent with the election

Instructions for Part I-B of Schedule AColumn (a) Enter the amount from the prior year Form 5227 Schedule A Part I-B line 4(d)Column (b) Enter the CRTrsquos current year NII

Using Form 8960 as a worksheet include the amounts of income gain loss and deductions reported on lines 1ndash12 of Form 8960 to compute NII

(line 12 of Form 8960) Dont file the Form 8960 with the Form 5227Column (c) Enter the lesser of (i) the sum of column (a) and (b) or (ii) the total distributions for the year (reported on line 2a of Part I-A of Schedule A) If the sum of columns (a) and (b) is zero or less enter -0- in column (c)Column (d) Subtract column (c) from the sum of columns (a) and (b) This amount will be reported in column (a) of the 2021 Form 5227Effect of the SNIIC Election on Netting and Ordering RulesThe SNIIC election will change the netting and ordering rules for ordinary income and capital gains or losses See Ordering Rules for Ordinary Income and Additional Rules for Capital Gains and Losses later for illustrative charts

You may want to read the Part II-A instructions and complete all worksheets (as necessary) before you make an entry on Part II-A of Schedule A

Part II-A Current Distributions Schedule (Section 664 trust only)You must give each recipient listed in Part II-A a Schedule K-1 (Form 1041) that reflects that recipients current distribution The following rules and worksheets will help you figure the type of income a recipient receives from the trusts distributions Also attach a copy of each Schedule K-1 to Form 5227 See the Instructions for Schedule K-1 (Form 1041) for more informationColumn (b) Recipients Identifying NumberAs a payer of income the trust is required under section 6109 to request and provide a proper identifying number for each recipient of income Enter the recipients number on the respective Schedule K-1 Individuals and business recipients are responsible for giving you their taxpayer identification numbers upon request You may use Form W-9 Request for Taxpayer Identification Number and Certification to request the recipients identifying number

TIP

TIP

PenaltyThe trust may incur a penalty under section 6723 if it fails to provide the taxpayer identification number of each recipient or income beneficiary identified on Schedule A The penalty is $50 for each failure to provide a required taxpayer identification number unless reasonable cause can be established for the failure If you are unable to provide the taxpayer identification number for any recipient or income beneficiary explain the circumstances in a signed affidavit and attach it to this return

Substitute FormsYou dont need prior IRS approval for a substitute Schedule K-1 if it is an exact copy of the IRS statement The boxes must use the same numbers and titles and must be in the same order and format as on the comparable IRS Schedule K-1 The substitute schedule must include the OMB number You must request IRS approval to use other substitute Schedules K-1 To request approval write to

Internal Revenue ServiceAttention Substitute Forms ProgramSEWCARMPPTP5000 Ellin Road C6-440Lanham MD 20706

You may be subject to a penalty if you file a Schedule K-1 that does not conform to the specifications in Pub 1167 General Rules and

Specifications for Substitute Forms and Schedules

For updates on the Substitute Forms Program after this publication went to print go to the product page for Pub 1167 at IRSgovPub1167

Inclusion of Amounts in Recipients IncomeIf there are two or more recipients each will be treated as receiving his or her pro rata share of the various classes of income or corpus

Amounts distributed by a charitable remainder annuity trust or a charitable remainder unitrust have the following characteristics in the hands of the recipientsbull First as ordinary income to the extent of ordinary income for the current year and undistributed ordinary income for prior years of the trust Ordinary income is computed without regard to any net operating loss deductions under section 172 See the Ordering Rules for Ordinary Income laterbull Second as capital gains to the extent of the trusts undistributed capital gains Undistributed capital gains of the trust are determined on a cumulative net basis without regard to any capital loss carrybacks and carryovers See the Netting Rules Ordering Rules for Capital Gains and Losses and Carryover Rules later for capital gainsbull Third as nontaxable income to the extent of the trusts nontaxable income for the current year and undistributed nontaxable income for prior yearsbull Fourth as a distribution of trust corpus For this purpose trust corpus means the net FMV of the trust assets less the total undistributed income (but not loss) in each of the above categories

CAUTION



Column (j) NIIIf the CRT has not made a SNIIC election then enter the total amount of NII allocated to each recipient in column (j) that is included in columns (d) through (g) for that recipient

If the CRT has made a SNIIC election then for each recipient multiply the amount in column (c) of Part I-B by the percentage reported in column (c) of line 4 of Part II-A of Schedule A and enter the amount in column (j) for each recipient

For each recipient enter the difference between the amount in column (j) and the sum of the amounts in columns (d) through (f) using code H in box 14 of the Schedule K-1 (Form 1041)bull If the amount in column (j) is less than the sum of the amounts in columns (d) through (f) enter the difference as a

negative amount under code H in box 14 of the Schedule K-1 (Form 1041)bull If the amount in column (j) is greater than the sum of the amounts in columns (d) through (f) enter the difference as a positive amount under code H in box 14 of the Schedule K-1 (Form 1041)Ordering rules for ordinary income Ordinary income is composed of two classes for purposes of characterizing and ordering distributions (a) qualified dividends and (b) all other ordinary income If the trust has both classes of ordinary income distributions are treated as made first from all the other ordinary income class and second from the qualified dividends class

The following chart highlights the difference in ordering rules depending on whether the CRT elects to use the SNIIC method

Ordering Rules for Ordinary IncomeSection 664 Method SNIIC Election Method

1 Distributions of all other ordinary income First ordinary income that is NII (408 rate) then

All ordinary income classOrdinary income that is Excluded Income (37 rate)

2 Distributions from the qualified dividends classFirst qualified dividends that are NII (238 rate) then

All qualified dividendsQualified dividends that are Excluded Income (20 rate)

Additional rules for capital gains and losses The following charts highlight the difference in netting and ordering rules for capital gains and losses depending on whether the CRT elects to use the Simplified Net Investment Income Calculation (SNIIC) method In general if the CRT elects to use the SNIIC method the netting and ordering rules will be essentially the same as those applicable before the 2013 tax year every dollar distributed will carry out the CRTrsquos NII to the extent of the CRTrsquos accumulated NII without regard to the class or category of that distribution for

regular tax purposes If the CRT uses the section 664 method for calculating NII and Excluded Income the netting and ordering rules are expanded to take into account additional classes within the ordinary income and capital gain categories that are created due to the imposition of an additional 38 tax on NII but not on Excluded IncomeNetting rules Gains and losses are netted within each class to arrive at a net gain or loss for that class After you net within a class the following additional netting rules apply to the capital gains category

Netting RulesSection 664 Method SNIIC Election Method

1 Among the long-term capital gain and loss classes (a) A net loss from the 28 long-term capital gain class that is NII (318 rate) reduces net gains in the following order

First gain from the section 1250 long-term capital gain class that is NII (288 rate) then

Not ApplicableNet gain from the 28 long-term capital gain class that is Excluded Income (28 rate) thenGain from the section 1250 long-term capital gain class that is Excluded Income (25 rate) thenNet gain from all the other long-term capital gain class that is NII (238 rate) and finallyNet gain from all the other long-term capital gain class that is Excluded Income (20 rate)

(b) A net loss from the 28 long-term capital gain class that is Excluded Income (28 rate) reduces net gains in the following orderFirst net gain from the 28 long-term capital gain class that is NII (318 rate) then First gain from the

section 1250 long-term capital gain class thenGain from the section 1250 long-term capital gain class that is NII (288 rate) then

Gain from the section 1250 long-term capital gain class that is Excluded Income (25 rate) then Net gain from all the other long-term capital gain class

Net gain from all the other long-term capital gain class that is NII (238 rate) and finallyNet gain from all the other long-term capital gain class that is Excluded Income (20 rate)

(c) A net loss from all the other long-term capital gain class that is NII (238 rate) reduces net gains in the following order



Section 664 Method SNIIC Election MethodFirst net gain from the 28 long-term capital gain class that is NII (318 rate) then

Not ApplicableGain from the section 1250 long-term capital gain class that is NII (288 rate) then Net gain from the 28 long-term capital gain class that is Excluded Income (28 rate) thenGain from the section 1250 long-term capital gain class that is Excluded Income (25 rate) and finallyNet gain from all the other long-term capital gain class that is Excluded Income (20 rate)

(d) A net loss from all the other long-term capital gain class that is Excluded Income (20 rate) reduces net gains in the following orderFirst net gain from the 28 long-term capital gain class that is NII (318 rate) then First net gain from the

28 long-term capital gain class thenGain from the section 1250 long-term capital gain class that is NII (288 rate) then

Net gain from the 28 long-term capital gain class that is Excluded Income (28 rate) then Gain from the section 1250 long-term capital gain classGain from the section 1250 long-term capital gain class that is Excluded Income (25 rate) and finally

Net gain from all the other long-term capital gain class that is NII (238 rate) 2 Among the short-term and long-term gain and loss classes

(a) A net short-term capital loss that is NII (408 rate) is applied to reduce the net short-term and net long-term capital gain classes as followsFirst short-term capital gain class that is Excluded Income (37 rate) then First net gain from the

28 long-term capital gain class thenNet gain from the 28 long-term capital gain class that is NII (318 rate) then

Gain from the section 1250 long-term capital gain class that is NII (288 rate) then Gain from the section 1250 long-term capital gain class and finallyNet gain from the 28 long-term capital gain class that is Excluded Income (28 rate) then

Gain from the section 1250 long-term capital gain class that is Excluded Income (25 rate) thenNet gain from all the other long-term capital gain class that is NII (238 rate) and finally Net gain from all the other

long-term capital gain class Net gain from all the other long-term capital gain class that is Excluded Income (20 rate)

(b) A net short-term capital loss that is Excluded Income (37 rate) is applied to reduce the net short-term and net long-term capital gain classes as followsFirst short-term capital gain class that is NII (408 rate) then Net gain from the 28 long-term capital gain class that is NII (318 rate) then First net gain from the


Net gain from the 28 long-term capital gain class that is Excluded Income (28 rate) then Gain from the section 1250 long-term capital gain class and finallyGain from the section 1250 long-term capital gain class that is Excluded Income (25 rate) then

Net gain from all the other long-term capital gain class that is NII (238 rate) and finally Net gain from all the other long-term capital gain classNet gain from all the other long-term capital gain class that is Excluded Income (20 rate)

3 An overall net long-term capital loss reduces any net short-term capital gain as followsFirst any net short-term capital gain that is NII (408 rate) then Overall net long-term

capital loss reduces any net short-term capital gainAny net short-term capital gain that is Excluded Income (37 rate)

Ordering rules for capital gains and losses The following rules apply to undistributed long-term capital gains on assets held more than 1 year If in any tax year of the trust the trust has both undistributed short-term capital gain

and undistributed long-term capital gain the short-term capital gain is deemed distributed before any long-term capital gain

Ordering Rules for Capital Gains and LossesSection 664 Method SNIIC Election Method

1 Any short-term capital gains are deemed to be distributed in the following orderFirst short-term capital gain class that is NII (408 rate) then

Short-term capital gainsShort-term capital gain class that is Excluded Income (37 rate)

2 Any long-term capital gains are deemed to be distributed in the following orderThe 28 long-term capital gain class that is NII (318 rate) is deemed distributed then The 28 long-term capital

gain class is deemed distributed thenThe section 1250 long-term capital gain class that is NII (288 rate) is deemed distributed then



Section 664 Method SNIIC Election MethodThe 28 long-term capital gain class that is Excluded Income (28 rate) is deemed distributed then The section 1250

long-term capital gain class is deemed distributed and

finally The section 1250 long-term capital gain class that is Excluded Income (25 rate) is deemed distributed then

All other long-term capital gain class that is NII (238 rate) is deemed distributed and finally All other long-term capital gain class All other long-term capital gain class is deemed distributed

Carryover RulesSection 664 Method SNIIC Election Method

1 If the trust has capital losses in excess of capital gains for any tax year The excess of the 408 rate net short-term capital loss over the net long-term capital gain for that year is a 408 rate short-term capital loss carryover to the next tax year

The excess of the net short-term capital loss over the net long-term

capital gain for that year is a short-term capital

loss carryover to the next tax year

The excess of the 37 rate net short-term capital loss over the net long-term capital gain for that year is a 37 rate short-term capital loss carryover to the next tax year

The excess of the 238 net long-term capital loss over the net short-term capital gain for that year is a 238 long-term capital loss carryover to the next tax year

The excess of the net long-term capital loss

over the net short-term capital gain for that year

is a long-term capital loss carryover to the next tax

year


2 If the trust has capital gains in excess of capital losses for any tax year The excess of the 408 rate net short-term capital gain over the net long-term capital loss for that year is to the extent not deemed distributed a 408 rate short-term capital gain carryover to the next tax year

The excess of the net short-term capital gain over the net long-term

capital loss for that year is to the extent not

deemed distributed a short-term capital gain

carryover to the next tax year

The excess of the 37 rate net short-term capital gain over the net long-term capital loss for that year is to the extent not deemed distributed a 37 rate short-term capital gain carryover to the next tax year

The excess of the 318 rate net long-term capital gain over the net short-term capital loss for that year is to the extent not deemed distributed a 318 rate long-term capital gain carryover to the next tax year

The excess of the net long-term capital gain

over the net short-term capital loss for that year

is to the extent not deemed distributed a long-term capital gain


The excess of the 288 rate net long-term capital gain over the net short-term capital loss for that year is to the extent not deemed distributed a 288 rate long-term capital gain carryover to the next tax yearThe excess of the 28 rate net long-term capital gain over the net short-term capital loss for that year is to the extent not deemed distributed a 28 rate long-term capital gain carryover to the next tax yearThe excess of the 25 rate net long-term capital gain over the net short-term capital loss for that year is to the extent not deemed distributed a 25 rate long-term capital gain carryover to the next tax yearThe excess of the 238 rate net long-term capital gain over the net short-term capital loss for that year is to the extent not deemed distributed a 238 rate long-term capital gain carryover to the next tax yearThe excess of the 20 rate net long-term capital gain over the net short-term capital loss for that year is to the extent not deemed distributed a 20 rate long-term capital gain carryover to the next tax year



Part II-B Current Distributions(Charitable lead trusts or pooled income funds only)Line 5 A charitable lead trust uses line 5 to report the aggregate amount of distributions made during the year to one or more noncharitable (private) beneficiaries For example when the lead period terminates all future distributions are payable to the noncharitable beneficiary However because charitable lead trusts can vary considerably the expiration of the lead period isnt the only context within which the trust may provide for payments to a noncharitable (private) beneficiary See the annotations to the sample charitable lead trusts in Rev Proc 2007-45 2007-29 IRB 89 and Rev Proc 2007-46 2007-29 IRB 102 for examples of other situations in which amounts may be payable to a noncharitable beneficiary

A pooled income fund uses line 5 to report the amount distributable annually among one or more noncharitable (private) beneficiaries who hold income interests in the fundPart III Assets and Donor InformationLine 7 Pooled income funds dont complete lines 6 and 7

For trusts that answered ldquoYesrdquo to question 6 complete all columns on line 7 for all donors to the trust in 2020 For additional donors to the trust that did not contribute to the trust in 2020 complete column (a) only

For trusts that answered ldquoNordquo to question 6 complete only column (a) for all donors to the trustPaperwork Reduction Act Notice We ask for the information on this form to carry out the Internal Revenue laws of the United States You are required to give us the

information We need it to ensure that you are complying with these laws and to allow us to figure and collect the right amount of tax

You arent required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless the form displays a valid OMB control number Books or records relating to a form or its instructions must be retained as long as their contents may become material in the administration of any Internal Revenue law Generally tax returns and return information are confidential as required by section 6103

The time needed to complete and file this form will vary depending on individual circumstances The estimated average time isRecordkeeping 89 hr 11 minLearning about the law or the form 21 hr 54 minPreparing the form 44 hr 47 minCopying assembling and sending the form to IRS 5 hr 54 min

If you have comments concerning the accuracy of these time estimates or suggestions for making this form simpler we would be happy to hear from you You can send us comments from IRSgovFormComments Or you can write to the Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave NW IR-6526 Washington DC 20224 Dont send the form to this office



Capital Gains Distribution Worksheet (KEEP FOR YOUR RECORDS)Use this worksheet to determine the ordering of any capital gains distributions

Short-term Long-termExcluded Accumulated

Net Investment Income (ANII) post- 2012

28 long-term capital gain class

Section 1250 long-term capital gain class

All other long-term capital gain classes

ExcludedANII post-2012 Excluded

ANII post-2012 Excluded ANII post-2012

1 Prior years undistributed gain or (loss)

2 Current year net gain or (loss)

3 Total combined gain or (loss) by class

4 Adjustments for netting any long-term capital (losses) on line 3

5 Total

6 Adjustments for netting any short-term capital gain or (loss) on line 3 (see Netting Rules earlier)

7 Total undistributed gains

8 2020 distributions

9 Carryforward to 2021 (line 7 less line 8)



Ordinary Income Distribution Worksheet (KEEP FOR YOUR RECORDS)Use this worksheet to determine the ordering of any ordinary income distributions

All other ordinary income Qualified dividendsExcluded Accumulated NII

post-2012 Excluded Accumulated NII post-2012

1 Prior years undistributed ordinary income or (loss)

2 Current year ordinary income or (loss)

3 Total combined ordinary income or (loss) by class

4 Adjustments for netting any ordinary (losses) on line 3

5 Total undistributed ordinary income





Index

CCapital Gains Distribution

Worksheet 18Carryover rules 16Current Distributions

Netting Rules 14Ordering Rules for Capital Gains

and Losses 15Ordering Rules for Ordinary

Income 14

NNet Investment Income Tax (NIIT) 6

Reg Sec 11411ndash10(g) Election 11

Simplified Net Investment Income Calculation (SNIIC) Election 12

OOrdinary Income Distribution

Worksheet 19

QQualified business income

deduction 1

SSchedule of Distributable Income 6

TType of Entity 4


Bulletin No 2005-34August 22 2005

HIGHLIGHTSOF THIS ISSUEThese synopses are intended only as aids to the reader inidentifying the subject matter covered They may not berelied upon as authoritative interpretations

INCOME TAX

Rev Proc 2005ndash52 page 326Sample inter vivos charitable remainder unitrust (CRUT)for one measuring life This procedure contains a sampledeclaration of trust that meets the requirements under section664 of the Code and 1664ndash3 of the regulations for an intervivos charitable remainder unitrust for one measuring life Thisprocedure also contains annotations to the sample trust andalternate provisions that may be integrated into the sampletrust Rev Proc 89ndash20 and section 4 of Rev Proc 90ndash31superseded

Rev Proc 2005ndash53 page 339Sample inter vivos charitable remainder unitrust (CRUT)for a term of years This procedure contains a sample decla-ration of trust that meets the requirements under section 664of the Code and 1664ndash3 of the regulations for an inter vivoscharitable remainder unitrust with a term of years unitrust pe-riod This procedure also contains annotations to the sampletrust and alternate provisions that may be integrated into thesample trust

Rev Proc 2005ndash54 page 353Sample inter vivos charitable remainder unitrust (CRUT)with consecutive interests for two measuring lives Thisprocedure contains a sample declaration of trust that meetsthe requirements under section 664 of the Code and 1664ndash3of the regulations for an inter vivos charitable remainder uni-trust with consecutive interests for two measuring lives Thisprocedure also contains annotations to the sample trust and al-ternate provisions that may be integrated into the sample trustSection 4 of Rev Proc 90ndash30 and section 5 of Rev Proc90ndash31 superseded

Rev Proc 2005ndash55 page 367Sample inter vivos charitable remainder unitrust (CRUT)with concurrent and consecutive interests for two mea-suring lives This procedure contains a sample declarationof trust that meets the requirements under section 664 of theCode and 1664ndash3 of the regulations for an inter vivos char-itable remainder unitrust with concurrent and consecutive in-terests for two measuring lives This procedure also containsannotations to the sample trust and alternate provisions thatmay be integrated into the sample trust Section 5 of RevProc 90ndash30 and section 6 of Rev Proc 90ndash31 superseded

Rev Proc 2005ndash56 page 383Sample testamentary charitable remainder unitrust(CRUT) for one measuring life This procedure contains asample declaration of trust that meets the requirements undersection 664 of the Code and 1664ndash3 of the regulations for atestamentary charitable remainder unitrust for one measuringlife This procedure also contains annotations to the sampletrust and alternate provisions that may be integrated into thesample trust Section 6 of Rev Proc 90ndash30 and section 7 ofRev Proc 90ndash31 superseded

Rev Proc 2005ndash57 page 392Sample testamentary charitable remainder unitrust(CRUT) for a term of years This procedure contains asample declaration of trust that meets the requirements undersection 664 of the Code and 1664ndash3 of the regulations fora testamentary charitable remainder unitrust with a term ofyears unitrust period This procedure also contains annota-tions to the sample trust and alternate provisions that may beintegrated into the sample trust

(Continued on the next page)

Finding Lists begin on page ii

Rev Proc 2005ndash58 page 402Sample testamentary charitable remainder unitrust(CRUT) with consecutive interests for two measuringlives This procedure contains a sample declaration of trustthat meets the requirements under section 664 of the Codeand 1664ndash3 of the regulations for a testamentary charitableremainder unitrust with consecutive interests for two mea-suring lives This procedure also contains annotations to thesample trust and alternate provisions that may be integratedinto the sample trust Section 7 of Rev Proc 90ndash30 andsection 8 of Rev Proc 90ndash31 superseded

Rev Proc 2005ndash59 page 412Sample testamentary charitable remainder unitrust(CRUT) with concurrent and consecutive interests fortwo measuring lives This procedure contains a sampledeclaration of trust that meets the requirements under section664 of the Code and 1664ndash3 of the regulations for a tes-tamentary charitable remainder unitrust with concurrent andconsecutive interests for two measuring lives This procedurealso contains annotations to the sample trust and alternateprovisions that may be integrated into the sample trustSection 8 of Rev Proc 90ndash30 and section 9 of Rev Proc90ndash31 superseded

ESTATE TAX



Rev Proc 2005ndash54 page 353Sample inter vivos charitable remainder unitrust (CRUT)with consecutive interests for two measuring lives Thisprocedure contains a sample declaration of trust that meetsthe requirements under section 664 of the Code and 1664ndash3of the regulations for an inter vivos charitable remainder uni-trust with consecutive interests for two measuring lives This

procedure also contains annotations to the sample trust and al-ternate provisions that may be integrated into the sample trustSection 4 of Rev Proc 90ndash30 and section 5 of Rev Proc90ndash31 superseded






August 22 2005 2005ndash34 IRB


GIFT TAX




Rev Proc 2005ndash55 page 367Sample inter vivos charitable remainder unitrust (CRUT)with concurrent and consecutive interests for two mea-suring lives This procedure contains a sample declarationof trust that meets the requirements under section 664 of theCode and 1664ndash3 of the regulations for an inter vivos char-itable remainder unitrust with concurrent and consecutive in-terests for two measuring lives This procedure also containsannotations to the sample trust and alternate provisions that

may be integrated into the sample trust Section 5 of RevProc 90ndash30 and section 6 of Rev Proc 90ndash31 superseded

2005ndash34 IRB August 22 2005

The IRS MissionProvide Americarsquos taxpayers top quality service by helpingthem understand and meet their tax responsibilities and by

applying the tax law with integrity and fairness to all

IntroductionThe Internal Revenue Bulletin is the authoritative instrument ofthe Commissioner of Internal Revenue for announcing officialrulings and procedures of the Internal Revenue Service and forpublishing Treasury Decisions Executive Orders Tax Conven-tions legislation court decisions and other items of generalinterest It is published weekly and may be obtained from theSuperintendent of Documents on a subscription basis Bulletincontents are compiled semiannually into Cumulative Bulletinswhich are sold on a single-copy basis

It is the policy of the Service to publish in the Bulletin all sub-stantive rulings necessary to promote a uniform application ofthe tax laws including all rulings that supersede revoke mod-ify or amend any of those previously published in the BulletinAll published rulings apply retroactively unless otherwise indi-cated Procedures relating solely to matters of internal man-agement are not published however statements of internalpractices and procedures that affect the rights and duties oftaxpayers are published

Revenue rulings represent the conclusions of the Service on theapplication of the law to the pivotal facts stated in the revenueruling In those based on positions taken in rulings to taxpayersor technical advice to Service field offices identifying detailsand information of a confidential nature are deleted to preventunwarranted invasions of privacy and to comply with statutoryrequirements

Rulings and procedures reported in the Bulletin do not have theforce and effect of Treasury Department Regulations but theymay be used as precedents Unpublished rulings will not berelied on used or cited as precedents by Service personnel inthe disposition of other cases In applying published rulings andprocedures the effect of subsequent legislation regulations

court decisions rulings and procedures must be consideredand Service personnel and others concerned are cautionedagainst reaching the same conclusions in other cases unlessthe facts and circumstances are substantially the same

The Bulletin is divided into four parts as follows

Part Imdash1986 CodeThis part includes rulings and decisions based on provisions ofthe Internal Revenue Code of 1986

Part IImdashTreaties and Tax LegislationThis part is divided into two subparts as follows Subpart ATax Conventions and Other Related Items and Subpart B Leg-islation and Related Committee Reports

Part IIImdashAdministrative Procedural and MiscellaneousTo the extent practicable pertinent cross references to thesesubjects are contained in the other Parts and Subparts Alsoincluded in this part are Bank Secrecy Act Administrative Rul-ings Bank Secrecy Act Administrative Rulings are issued bythe Department of the Treasuryrsquos Office of the Assistant Sec-retary (Enforcement)

Part IVmdashItems of General InterestThis part includes notices of proposed rulemakings disbar-ment and suspension lists and announcements

The last Bulletin for each month includes a cumulative indexfor the matters published during the preceding months Thesemonthly indexes are cumulated on a semiannual basis and arepublished in the last Bulletin of each semiannual period

The contents of this publication are not copyrighted and may be reprinted freely A citation of the Internal Revenue Bulletin as the source would be appropriate

For sale by the Superintendent of Documents US Government Printing Office Washington DC 20402


Part I Rulings and Decisions Under the Internal Revenue Codeof 1986Section 170mdashCharitableetc Contributions and Gifts26 CFR 1170Andash6 Charitable contributions in trust

Sample inter vivos CRUT for one measuringlife This revenue procedure contains a sample decla-ration of trust that meets the requirements under sec-tion 664 of the Code and 1664ndash3 of the Income TaxRegulations for an inter vivos charitable remainderunitrust for one measuring life This revenue proce-dure also contains annotations to the sample trust andalternate provisions that may be integrated into thesample trust See Rev Proc 2005-52 page 326

Sample inter vivos CRUT for a term of yearsThis revenue procedure contains a sample declarationof trust that meets the requirements under section 664of the Code and 1664ndash3 of the Income Tax Regula-tions for an inter vivos charitable remainder unitrustfor a term of years This revenue procedure also con-tains annotations to the sample trust and alternate pro-visions that may be integrated into the sample trustSee Rev Proc 2005-53 page 339

Sample inter vivos CRUT with consecutive in-terests for two measuring lives This revenue proce-dure contains a sample declaration of trust that meetsthe requirements under section 664 of the Code and1664ndash3 of the Income Tax Regulations for an intervivos charitable remainder unitrust with consecutiveinterests for two measuring lives This revenue pro-cedure also contains annotations to the sample trustand alternate provisions that may be integrated intothe sample trust See Rev Proc 2005-54 page 353

Sample inter vivos CRUT with concurrent andconsecutive interests for two measuring lives Thisrevenue procedure contains a sample declaration oftrust that meets the requirements under section 664 ofthe Code and 1664ndash3 of the Income Tax Regulationsfor an inter vivos charitable remainder unitrust withconcurrent and consecutive interests for two measur-ing lives This revenue procedure also contains an-notations to the sample trust and alternate provisionsthat may be integrated into the sample trust See RevProc 2005-55 page 367

Sample testamentary CRUT for one measuringlife This revenue procedure contains a sample decla-ration of trust that meets the requirements under sec-tion 664 of the Code and 1664ndash3 of the Income TaxRegulations for a testamentary charitable remainderunitrust for one measuring life This revenue proce-dure also contains annotations to the sample trust andalternate provisions that may be integrated into thesample trust See Rev Proc 2005-56 page 383

Sample testamentary CRUT for a term of yearsThis revenue procedure contains a sample declarationof trust that meets the requirements under section 664of the Code and 1664ndash3 of the Income Tax Regula-tions for a testamentary charitable remainder unitrustfor a term of years This revenue procedure also con-tains annotations to the sample trust and alternate pro-visions that may be integrated into the sample trustSee Rev Proc 2005-57 page 392

Sample testamentary CRUT with consecutiveinterests for two measuring lives This revenueprocedure contains a sample declaration of trust thatmeets the requirements under section 664 of the Codeand 1664ndash3 of the Income Tax Regulations for a tes-tamentary charitable remainder unitrust with consec-utive interests for two measuring lives This rev-enue procedure also contains annotations to the sam-ple trust and alternate provisions that may be inte-grated into the sample trust See Rev Proc 2005-58page 402

Sample testamentary CRUT with concurrentand consecutive interests for two measuring livesThis revenue procedure contains a sample declarationof trust that meets the requirements under section664 of the Code and 1664ndash3 of the Income TaxRegulations for a testamentary charitable remainderunitrust with concurrent and consecutive interests fortwo measuring lives This revenue procedure alsocontains annotations to the sample trust and alternateprovisions that may be integrated into the sampletrust See Rev Proc 2005-59 page 412

Section 664mdashCharitableRemainder Trusts26 CFR 1664ndash1 Charitable remainder trusts26 CFR 1664ndash3 Charitable remainder unitrust26 CFR 1664ndash4 Calculation of the fair market valueof the remainder interest in a charitable remainderunitrust


Sample inter vivos CRUT for a term of yearsThis revenue procedure contains a sample declarationof trust that meets the requirements under section 664of the Code and 1664ndash3 of the Income Tax Regula-tions for an inter vivos charitable remainder unitrust

for a term of years This revenue procedure also con-tains annotations to the sample trust and alternate pro-visions that may be integrated into the sample trustSee Rev Proc 2005-53 page 339





Sample testamentary CRUT with consecutiveinterests for two measuring lives This revenueprocedure contains a sample declaration of trust thatmeets the requirements under section 664 of the Codeand 1664ndash3 of the Income Tax Regulations for a tes-tamentary charitable remainder unitrust with consec-utive interests for two measuring lives This rev-enue procedure also contains annotations to the sam-ple trust and alternate provisions that may be inte-

2005ndash34 IRB 324 August 22 2005

grated into the sample trust See Rev Proc 2005-58page 402


Section 2055mdashTransfersfor Public Charitable andReligious Uses26 CFR 202055ndash2 Transfers not exclusively forcharitable purposes








Sample testamentary CRUT with concurrentand consecutive interests for two measuring livesThis revenue procedure contains a sample declarationof trust that meets the requirements under section664 of the Code and 1664ndash3 of the Income TaxRegulations for a testamentary charitable remainderunitrust with concurrent and consecutive interests fortwo measuring lives This revenue procedure alsocontains annotations to the sample trust and alternate

provisions that may be integrated into the sampletrust See Rev Proc 2005-59 page 412

Section 2522mdashCharitableand Similar Gifts

26 CFR 202522(c)ndash3 Transfers not exclusively forcharitable etc purposes in the case of gifts madeafter July 31 1969





August 22 2005 325 2005ndash34 IRB

Part III Administrative Procedural and Miscellaneous26 CFR 601201 Rulings and determination letters(Also Part I sectsect 170 664 2055 2522 1170Andash6 1664ndash1 1664ndash3 1664ndash4 202055ndash2 252522(c)ndash3)

Rev Proc 2005ndash52

SECTION 1 PURPOSE

This revenue procedure contains an annotated sample declaration of trust and alternate provisions that meet the requirements ofsect 664(d)(2) and (d)(3) of the Internal Revenue Code for an inter vivos charitable remainder unitrust (CRUT) providing for unitrustpayments for one measuring life followed by the distribution of trust assets to a charitable remainderman

SECTION 2 BACKGROUND

Previously the Internal Revenue Service issued sample trust instruments for certain types of CRUTs The Service is updating thepreviously issued samples and issuing new samples for additional types of CRUTs annotations and alternate sample provisions areincluded as further guidance In addition to the sample trust instrument included in this revenue procedure for an inter vivos CRUTproviding for unitrust payments for one measuring life samples are provided in other separate revenue procedures for

(a) an inter vivos CRUT providing for unitrust payments for a term of years (see Rev Proc 2005ndash53)(b) an inter vivos CRUT providing for unitrust payments payable consecutively for two measuring lives (see Rev Proc

2005ndash54 superseding section 4 of Rev Proc 90ndash30 1990ndash1 CB 534 and section 5 of Rev Proc 90ndash31 1990ndash1CB 539)

(c) an inter vivos CRUT providing for unitrust payments payable concurrently and consecutively for two measuring lives (seeRev Proc 2005ndash55 superseding section 5 of Rev Proc 90ndash30 and section 6 of Rev Proc 90ndash31)

(d) a testamentary CRUT providing for unitrust payments for one measuring life (see Rev Proc 2005ndash56 superseding section6 of Rev Proc 90ndash30 and section 7 of Rev Proc 90ndash31)

(e) a testamentary CRUT providing for unitrust payments for a term of years (see Rev Proc 2005ndash57)(f) a testamentary CRUT providing for unitrust payments payable consecutively for two measuring lives (see Rev Proc

2005ndash58 superseding section 7 of Rev Proc 90ndash30 and section 8 of Rev Proc 90ndash31) and(g) a testamentary CRUT providing for unitrust payments payable concurrently and consecutively for two measuring lives (see

Rev Proc 2005ndash59 superseding section 8 of Rev Proc 90ndash30 and section 9 of Rev Proc 90ndash31)

SECTION 3 SCOPE AND OBJECTIVE

Section 4 of this revenue procedure provides a sample declaration of trust for an inter vivos CRUT with one measuring life that iscreated by an individual who is a citizen or resident of the United States Section 5 of this revenue procedure provides annotations tothe provisions of the sample trust Section 6 of this revenue procedure provides samples of certain alternate provisions concerning(01) the payment of part of the unitrust amount to an organization described in sect 170(c) (02) a qualified contingency (03) thelast unitrust payment to the recipient (04) the restriction of the charitable remainderman to a public charity (05) a retained right tosubstitute the charitable remainderman (06) a power of appointment to designate the charitable remainderman (07) the net incomemethod of calculating the unitrust amount (08) the net income with make-up method of calculating the unitrust amount and (09) acombination of methods for calculating the unitrust amount

For transfers to a qualifying CRUT as defined in sect 664(d)(2) and if applicable sect 664(d)(3) the remainder interest will be de-ductible by a citizen or resident of the United States under sectsect 170(f)(2)(A) 2055(e)(2)(A) and 2522(c)(2)(A) for income estate andgift tax purposes respectively if the other requirements of sectsect 170(f)(2)(A) 2055(e)(2)(A) and 2522(c)(2)(A) (that is the require-ments not relating to the provisions of the governing instrument) also are met The Service will recognize a trust as a qualified CRUTmeeting all of the requirements of sect 664(d)(2) and if applicable sect 664(d)(3) if the trust operates in a manner consistent with the termsof the trust instrument if the trust is a valid trust under applicable local law and if the trust instrument (i) is substantially similar tothe sample in section 4 of this revenue procedure or (ii) properly integrates one or more alternate provisions from section 6 of thisrevenue procedure into a document substantially similar to the sample in section 4 of this revenue procedure A trust that containssubstantive provisions in addition to those provided in section 4 of this revenue procedure (other than properly integrated alternateprovisions from section 6 of this revenue procedure or provisions necessary to establish a valid trust under applicable local law that arenot inconsistent with the applicable federal tax requirements) or that omits any of the provisions of section 4 of this revenue procedure(unless an alternate provision from section 6 of this revenue procedure is properly integrated) will not necessarily be disqualifiedbut neither will that trust be assured of qualification under the provisions of this revenue procedure The Service generally will notissue a letter ruling on whether an inter vivos trust created by an individual providing for unitrust payments for one measuring life


qualifies as a CRUT The Service however generally will issue letter rulings on the effect of substantive trust provisions other thanthose contained in sections 4 and 6 of this revenue procedure on the qualification of a trust as a CRUT

SECTION 4 SAMPLE INTER VIVOS CHARITABLE REMAINDER UNITRUST mdash ONE LIFE

On this day of 20 I (hereinafter ldquothe Donorrdquo) desiring to establish acharitable remainder unitrust within the meaning of Rev Proc 2005ndash52 and sect 664(d)(2) of the Internal Revenue Code (hereinafterldquothe Coderdquo) hereby enter into this trust agreement with as the initial trustee (hereinafter ldquothe Trusteerdquo) This trustshall be known as the Charitable Remainder Unitrust

1 Funding of Trust The Donor hereby transfers and irrevocably assigns on the above date to the Trustee the property describedin Schedule A and the Trustee accepts the property and agrees to hold manage and distribute the property and any property subse-quently transferred under the terms set forth in this trust instrument

2 Payment of Unitrust Amount In each taxable year of the trust during the unitrust period the Trustee shall pay to [permissiblerecipient] (hereinafter ldquothe Recipientrdquo) a unitrust amount equal to [a number no less than 5 and no more than 50] percent of the netfair market value of the assets of the trust valued as of the first day of each taxable year of the trust (hereinafter ldquothe valuation daterdquo)The first day of the unitrust period shall be the date property is first transferred to the trust and the last day of the unitrust period shallbe the date of the Recipientrsquos death The unitrust amount shall be paid in equal quarterly installments at the end of each calendarquarter from income and to the extent income is not sufficient from principal Any income of the trust for a taxable year in excess ofthe unitrust amount shall be added to principal If for any year the net fair market value of the trust assets is incorrectly determinedthen within a reasonable period after the correct value is finally determined the Trustee shall pay to the Recipient (in the case of anundervaluation) or receive from the Recipient (in the case of an overvaluation) an amount equal to the difference between the unitrustamount(s) properly payable and the unitrust amount(s) actually paid

3 Proration of Unitrust Amount For a short taxable year and for the taxable year during which the unitrust period ends the Trusteeshall prorate on a daily basis the unitrust amount described in paragraph 2 or if an additional contribution is made to the trust theunitrust amount described in paragraph 5

4 Distribution to Charity At the termination of the unitrust period the Trustee shall distribute all of the then principal and incomeof the trust (other than any amount due the Recipient under the terms of this trust) to [designated remainderman] (hereinafter ldquotheCharitable Organizationrdquo) If the Charitable Organization is not an organization described in sectsect 170(c) 2055(a) and 2522(a) of theCode at the time when any principal or income of the trust is to be distributed to it then the Trustee shall distribute the then principaland income to one or more organizations described in sectsect 170(c) 2055(a) and 2522(a) of the Code as the Trustee shall select and inthe proportions as the Trustee shall decide in the Trusteersquos sole discretion

5 Additional Contributions If any additional contributions are made to the trust after the initial contribution the unitrust amountfor the year in which any additional contribution is made shall be [same percentage used in paragraph 2] percent of the sum of (a)the net fair market value of the trust assets as of the valuation date (excluding the assets so added and any post-contribution incomefrom and appreciation on such assets during that year) and (b) for each additional contribution during the year the fair market valueof the assets so added as of the valuation date (including any post-contribution income from and appreciation on such assets throughthe valuation date) multiplied by a fraction the numerator of which is the number of days in the period that begins with the date ofcontribution and ends with the earlier of the last day of the taxable year or the last day of the unitrust period and the denominator ofwhich is the number of days in the period that begins with the first day of such taxable year and ends with the earlier of the last dayin such taxable year or the last day of the unitrust period In a taxable year in which an additional contribution is made on or after thevaluation date the assets so added shall be valued as of the date of contribution without regard to any post-contribution income orappreciation rather than as of the valuation date

6 Deferral of the Unitrust Payment Allocable to Testamentary Transfer All property passing to the trust by reason of the deathof the Donor (hereinafter ldquothe testamentary transferrdquo) shall be considered to be a single contribution that is made on the date of theDonorrsquos death Notwithstanding the provisions of paragraphs 2 and 5 above the obligation to pay the unitrust amount with respectto the testamentary transfer shall commence with the date of the Donorrsquos death Nevertheless payment of the unitrust amount withrespect to the testamentary transfer may be deferred from the date of the Donorrsquos death until the end of the taxable year in which thefunding of the testamentary transfer is completed Within a reasonable time after the end of the taxable year in which the testamentarytransfer is completed the Trustee must pay to the Recipient (in the case of an underpayment) or receive from the Recipient (in thecase of an overpayment) the difference between any unitrust amounts allocable to the testamentary transfer that were actually paidplus interest and the unitrust amounts allocable to the testamentary transfer that were payable plus interest The interest shall becomputed for any period at the rate of interest compounded annually that the federal income tax regulations under sect 664 of the Codeprescribe for this computation

7 Unmarketable Assets Whenever the value of a trust asset must be determined the Trustee shall determine the value of any assetsthat are not cash cash equivalents or other assets that can be readily sold or exchanged for cash or cash equivalents (hereinafter ldquoun-marketable assetsrdquo) by either (a) obtaining a current ldquoqualified appraisalrdquo from a ldquoqualified appraiserrdquo as defined in sect 1170Andash13(c)(3)and sect 1170Andash13(c)(5) of the Income Tax Regulations respectively or (b) ensuring the valuation of these unmarketable assets is per-formed exclusively by an ldquoindependent trusteerdquo within the meaning of sect 1664ndash1(a)(7)(iii) of the Income Tax Regulations


8 Prohibited Transactions The Trustee shall not engage in any act of self-dealing within the meaning of sect 4941(d) of the Code asmodified by sect 4947(a)(2)(A) of the Code and shall not make any taxable expenditures within the meaning of sect 4945(d) of the Codeas modified by sect 4947(a)(2)(A) of the Code

9 Taxable Year The taxable year of the trust shall be the calendar year10 Governing Law The operation of the trust shall be governed by the laws of the State of However the

Trustee is prohibited from exercising any power or discretion granted under said laws that would be inconsistent with the qualificationof the trust as a charitable remainder unitrust under sect 664(d)(2) of the Code and the corresponding regulations

11 Limited Power of Amendment This trust is irrevocable However the Trustee shall have the power acting alone to amend thetrust from time to time in any manner required for the sole purpose of ensuring that the trust qualifies and continues to qualify as acharitable remainder unitrust within the meaning of sect 664(d)(2) of the Code

12 Investment of Trust Assets Nothing in this trust instrument shall be construed to restrict the Trustee from investing the trustassets in a manner that could result in the annual realization of a reasonable amount of income or gain from the sale or disposition oftrust assets

13 Definition of Recipient References to the Recipient in this trust instrument shall be deemed to include the estate of the Recipientwith regard to all provisions in this trust instrument that describe amounts payable to andor due from the Recipient The prior sentenceshall not apply to the determination of the last day of the unitrust period

SECTION 5 ANNOTATIONS REGARDING SAMPLE INTER VIVOS CHARITABLE REMAINDERUNITRUST mdash ONE LIFE

01 Annotations for Introductory Paragraph and Paragraph 1 Funding of Trust of the Sample Trust

(1) Factors concerning qualification of trust A deduction must be allowable under sect 170 sect 2055 or sect 2522 for propertycontributed to the trust Section 1664ndash1(a)(1)(iii)(a) of the Income Tax Regulations The trust must meet the definitionof and function exclusively as a charitable remainder trust from the creation of the trust Section 1664ndash1(a)(4) Solelyfor purposes of sect 664 a trust is deemed created at the earliest time that neither the grantor nor any other person is treatedas the owner of the entire trust under subpart E part 1 subchapter J chapter 1 subtitle A of the Code (subpart E) but inno event prior to the time property is first transferred to the trust Neither the donor nor the donorrsquos spouse shall be treatedas the owner of the trust under subpart E merely because he or she is named as a recipient of the unitrust amount Section1664ndash1(a)(4) In addition funding the trust with certain types of assets may disqualify a charitable remainder trust Seesect 1664ndash1(a)(7) and Rev Rul 73ndash610 1973ndash2 CB 213

(2) Valuation of unmarketable assets If the trust is funded with unmarketable assets the net fair market value of the assetsmust be determined exclusively by an independent trustee as defined in sect 1664ndash1(a)(7)(iii) or must be determined by acurrent ldquoqualified appraisalrdquo from a ldquoqualified appraiserrdquo as defined in sect 1170Andash13(c)(3) and (c)(5) respectively Section1664ndash1(a)(7) See section 507 of this revenue procedure for further guidance related to the valuation of unmarketableassets

(3) Income tax deductibility limitations The amount of the charitable deduction for income tax purposes is affected by a numberof factors including the type of property contributed to the trust the type of charity receiving the property whether theremainder interest is paid outright to charity or held in further trust and the donorrsquos adjusted gross income (with certainadjustments) See sect 170(b) and (e) sect 1170Andash8 Rev Rul 80ndash38 1980ndash1 CB 56 and Rev Rul 79ndash368 1979ndash2 CB109 See section 604 of this revenue procedure for an alternate provision that restricts the charitable remainderman to apublic charity (as defined therein)

(4) Trustee provisions Alternate or successor trustees may be designated in the trust instrument In addition the trust instru-ment may contain other administrative provisions relating to the trusteersquos duties and powers as long as the provisions donot conflict with the rules governing charitable remainder trusts under sect 664 and the regulations thereunder

(5) Identity of donor For purposes of qualification under this revenue procedure the donor may be an individual or a husbandand wife Appropriate adjustments should be made to the introductory paragraph if a husband and wife are the donorsTerms such as ldquograntorrdquo or ldquosettlorrdquo may be substituted for ldquodonorrdquo

02 Annotations for Paragraph 2 Payment of Unitrust Amount of the Sample Trust

(1) Permissible recipients For a CRUT with a unitrust period based on the life of one individual the unitrust amount mustgenerally be paid to that individual and the individual must be living at the time of the creation of the trust See Rev Rul2002ndash20 2002ndash1 CB 794 for situations in which the unitrust amount may be paid to a trust for the benefit of an individualwho is financially disabled An organization described in sect 170(c) may receive part but not all of the unitrust amountSection 664(d)(2)(A) and sect 1664ndash3(a)(3)(i) See section 601 of this revenue procedure for an alternate provision thatprovides for payment of part of the unitrust amount to an organization described in sect 170(c)


(2) Fixed percentage method Paragraph 2 Payment of Unitrust Amount of the sample trust calculates the unitrust amountunder the fixed percentage method by using a fixed percentage of the net fair market value of the trust assets valued annuallySee section 607 of this revenue procedure for an alternate provision that uses the net income method for calculating theunitrust amount See section 608 of this revenue procedure for an alternate provision that uses the net income with make-upmethod for calculating the unitrust amount See section 609 of this revenue procedure for an alternate provision that usesa combination of methods for calculating the unitrust amount as described in sect 1664ndash3(a)(1)(i)(c)

(3) Percentage requirements The fixed percentage unitrust amount must be at least 5 percent and not more than 50 percent ofthe annual net fair market value of the assets in the trust Section 664(d)(2)(A) In addition with respect to each contributionof property to the trust the value of the charitable remainder interest (determined under sect 7520) is required to be at least10 percent of the net fair market value of the contributed property as of the date of its contribution to the trust Section664(d)(2)(D)

(4) Payment of unitrust amount in installments Paragraph 2 Payment of Unitrust Amount of the sample trust specifies thatthe unitrust amount is to be paid in equal quarterly installments at the end of each quarter However the trust instrumentmay specify that the unitrust amount is to be paid to the recipient annually or in equal or unequal installments throughoutthe year See sect 1664ndash3(a)(1)(i) The amount of the charitable deduction will be affected by the frequency of payment bywhether the installments are equal or unequal and by whether each installment is payable at the beginning or end of theperiod See sect 1664ndash3(c) and sect 1664ndash4

(5) Rules applicable to valuation Paragraph 2 Payment of Unitrust Amount of the sample trust specifies that the net fairmarket value of trust assets is to be valued as of the first day of each taxable year of the trust However the value of thetrust assets may be determined on any one date during the taxable year of the trust or by taking the average of valuationsmade on more than one date during the taxable year of the trust so long as the same valuation date or dates and the samevaluation methods are used each year If the governing instrument does not specify the valuation date or dates the trusteemust select the date or dates and indicate the selection on the first Form 5227 ldquoSplit-Interest Trust Information Returnrdquothat the trust must file Section 1664ndash3(a)(1)(iv) Note that if the valuation date is a date other than the first day of eachtaxable year of the trust it may be necessary to modify the provisions in the sample trust regarding (i) the timing of thepayment of the unitrust amount (ii) the proration of the unitrust amount in a short taxable year and the last taxable yearof the unitrust period and (iii) additional contributions See sect 1664ndash3(a)(1)(v) and sect 1664ndash3(b) See section 505(4) forfurther guidance related to the valuation date and additional contributions

(6) Payment of unitrust amount by close of taxable year Generally the unitrust amount for any taxable year if computed underthe fixed percentage method must be paid before the close of the taxable year for which it is due For circumstances underwhich the unitrust amount computed under the fixed percentage method may be paid within a reasonable time after theclose of the taxable year see sect 1664ndash3(a)(1)(i)(g) and (k) See section 506(2) of this revenue procedure for additionalinformation regarding the deferral of the unitrust payment allocable to a testamentary transfer

(7) Incorrect valuations Nothing in sect 664 or the regulations thereunder requires that interest be paid on the amount ofany underpayment or overpayment of the unitrust amount resulting from the incorrect valuation of trust assets Section1664ndash3(a)(1)(iii) Notwithstanding the foregoing state law may require the payment of interest on the amount of anysuch underpayment or overpayment of the unitrust amount

(8) Early distributions to charity The trust instrument may provide that an amount other than the unitrust amount shall bepaid (or may be paid in the discretion of the trustee) to an organization described in sect 170(c) If such a distribution is madein kind the adjusted basis of the property distributed must be fairly representative of the adjusted basis of the propertyavailable for distribution on the date of distribution Section 1664ndash3(a)(4)

03 Annotations for Paragraph 3 Proration of Unitrust Amount of the Sample Trust

(1) Prorating unitrust amount To compute the unitrust amount in a short taxable year and in the taxable year in which theunitrust period terminates see sect 1664ndash3(a)(1)(v)(a) and (b) respectively

(2) Determining unitrust amount payable in year of recipientrsquos death Paragraph 3 Proration of Unitrust Amount of the sampletrust specifies that the unitrust amount shall be prorated on a daily basis See section 603 of this revenue procedure for analternate provision that provides for the termination of the payment of the unitrust amount with the last regular paymentpreceding the recipientrsquos death

04 Annotations for Paragraph 4 Distribution to Charity of the Sample Trust

(1) Minimum value of remainder As noted in section 502(3) of this revenue procedure with respect to each contribution ofproperty to the trust the value of the charitable remainder interest (determined under sect 7520) is required to be at least 10percent of the net fair market value of the property contributed to the trust as of the date of its contribution to the trustSection 664(d)(2)(D)


(2) Distribution to remainderman The trustee of a charitable remainder trust has a reasonable time after the termination of theunitrust period to complete the settlement of the trust including making the required distributions See sect 1664ndash3(a)(6)(ii)

(3) Designated remainderman Any named charitable remainderman must be an organization described in sect 170(c) at thetime of the transfer to the CRUT See sect 664(d)(2)(C) Any named charitable remainderman must also be an organizationdescribed in sect 2522(a) to qualify for the gift tax charitable deduction and an organization described in sect 2055(a) to qualifyfor the estate tax charitable deduction See Rev Rul 77ndash385 1977ndash2 CB 331 If it is determined that a deduction undersect 2055(a) will not be necessary in any event all references to sect 2055(a) in the trust instrument may be deleted The trustinstrument may restrict the charitable remainderman to an organization described in sectsect 170(c) 2055(a) and 2522(a) butgrant to a trustee or other person the power to designate the actual charitable remainderman The gift of the remainderinterest will be incomplete for gift tax purposes if for example (i) the donor retains the power to substitute the charitableremainderman or (ii) the trust instrument provides the trustee with the power to designate the charitable remaindermanand the donor is not prohibited from serving as trustee See sect 252511ndash2(c) Note however that an income tax charitablededuction is available even if the donor has the authority to substitute the charitable remainderman or the trustee has theauthority to designate the charitable remainderman Rev Rul 68ndash417 1968ndash2 CB 103 Rev Rul 79ndash368 1979ndash2 CB109 See section 605 of this revenue procedure for an alternate provision in which the donor retains the right to substitutethe charitable remainderman See section 606 of this revenue procedure for an alternate provision in which the recipient isgranted a power of appointment to designate the charitable remainderman

(4) Multiple remaindermen The remainder interest may pass to more than one charitable organization as long as each organi-zation is described in sectsect 170(c) and 2522(a) and if needed sect 2055(a) Section 1664ndash3(a)(6)(i)

(5) Alternative remaindermen The trust instrument of a CRUT must provide a means for selecting alternative charitable re-maindermen in the event any designated organization is not qualified at the time any payments are to be made to it from thetrust Section 1664ndash3(a)(6)(iv) This requirement is satisfied in the sample trust by conferring the power upon the trusteeto designate an alternative charitable remainderman Note that the donor may designate one or more alternative charitableremaindermen in the trust instrument however the trust instrument must continue to provide a means for selecting an al-ternative charitable remainderman if any designated organization is not qualified at the time payments are to be made to itfrom the trust

(6) Continuing trust for charity Upon the expiration of the unitrust period the trust may continue in existence for charity Seesect 1664ndash3(a)(6)(ii) See section 508(3) of this revenue procedure for certain governing instrument requirements that applywhen the trust continues in existence for charity

05 Annotations for Paragraph 5 Additional Contributions of the Sample Trust

(1) Identity of additional contributors For purposes of qualification under this revenue procedure only a donor or a donorrsquosestate may make an additional contribution to the trust See section 501(5) of this revenue procedure for examples of whomay be a donor of a CRUT for purposes of qualification under this revenue procedure

(2) Proration of additional contributions Paragraph 5 Additional Contributions of the sample trust provides a formula fordetermining the unitrust amount in each year that an additional contribution is made to the CRUT If an additional contri-bution is made in a short taxable year or in the taxable year of the recipientrsquos death the unitrust amount computed underparagraph 5 of the sample trust must be prorated pursuant to paragraph 3 Proration of Unitrust Amount of the sample trust

(3) Severance of certain additional contributions If an additional contribution is made to an existing CRUT and the contri-bution does not satisfy the 10 percent test described in sect 664(d)(2)(D) the contribution shall be treated as a transfer to aseparate trust Section 664(d)(4)

(4) Valuation date in year of additional contribution Paragraph 2 Payment of Unitrust Amount of the sample trust specifiesa January 1 valuation date for the trust The formula contained in paragraph 5 Additional Contributions of the sampletrust may be used when January 1 or any other single date during the taxable year is selected as the valuation date for aCRUT Note however that if a single date other than January 1 is selected as the valuation date for a CRUT the formulas inboth paragraphs 2 and 5 of the sample trust for computing the unitrust amount will be deficient unless the trust instrumentaddresses the possibility that the unitrust period may end before the valuation date for instance by providing that in a yearin which the unitrust period ends before the valuation date ldquothe valuation daterdquo for purposes of paragraph 2 and paragraph5 shall be the last day of the unitrust period In addition if the trust instrument is drafted to provide for the valuation of trustassets by averaging the valuations as of multiple specified dates during the trust year the additional contributions formulawill require modification

(5) Option to prohibit additional contributions Paragraph 5 Additional Contributions of the sample trust provides rules fordetermining the unitrust amount payable in a year during which an additional contribution is made to the trust Howeverparagraph 5 of the trust instrument may instead prohibit contributions to the trust after the initial contribution Section1664ndash3(b) In such an instance all references to the unitrust amount computed under paragraph 5 must be removed fromthe sample trust and paragraph 6 Deferral of the Unitrust Payment Allocable to Testamentary Transfer of the sample trustshould be deleted


06 Annotations for Paragraph 6 Deferral of the Unitrust Payment Allocable to Testamentary Transfer ofthe Sample Trust

(1) Contribution at death of donor All property passing to a charitable remainder unitrust by reason of the death of the donorshall be considered to constitute a single contribution Section 1664ndash3(b)

(2) Testamentary additions If the donor is not the recipient and the donor makes an additional contribution at death wherebythe obligation to pay the unitrust amount with respect to any property passing to the trust by reason of the donorrsquos deathbegins as of the date of the donorrsquos death the requirement to pay the portion of the unitrust amount allocable to that contri-bution may be deferred pursuant to the provisions of sect 1664ndash1(a)(5)(i) The deferral provision in paragraph 6 of the sampletrust uses the method for computing deferred payments that is provided in sect 1664ndash1(a)(5)(i) Note that sect 1664ndash1(a)(5)(ii)provides an alternate method for determining the amount described in sect 1664ndash1(a)(5)(i)(b) ie the unitrust amountspayable plus interest on those amounts Rev Rul 92ndash57 1992ndash2 CB 123 provides sample language to be includedin the governing instrument if the alternate method set forth in sect 1664ndash1(a)(5)(ii) for determining the amount describedin sect 1664ndash1(a)(5)(i)(b) is selected Note that paragraph 6 Deferral of the Unitrust Payment Allocable to TestamentaryTransfer of the sample trust may be deleted if the donor is the recipient

07 Annotations for Paragraph 7 Unmarketable Assets of the Sample Trust

(1) Multiple trustees Any co-trustee who is an independent trustee within the meaning of sect 1664ndash1(a)(7)(iii) may value thetrustrsquos unmarketable assets

(2) Valuation using qualified appraisal or independent trustee The trustee may alternately use an independent trustee or aqualified appraisal by a qualified appraiser to value unmarketable assets For instance an unmarketable asset that is valuedin one year by an independent trustee may be valued in a successive year by a qualified appraiser in a qualified appraisalIn addition within a single year some unmarketable assets may be valued by a qualified appraiser while others are valuedby an independent trustee

(3) Appointment of independent trustee The governing instrument may authorize the trustee of the trust to appoint from timeto time an independent trustee within the meaning of sect 1664ndash1(a)(7)(iii) to perform the valuation of unmarketable assets

08 Annotations for Paragraph 8 Prohibited Transactions of the Sample Trust

(1) Payment of the unitrust amount Payment of the unitrust amount to the recipient is not considered an act of self-dealingwithin the meaning of sect 4941(d) as modified by sect 4947(a)(2)(A) or a taxable expenditure within the meaning of sect 4945(d)as modified by sect 4947(a)(2)(A) Section 534947ndash1(c)(2) of the Foundation and Similar Excise Taxes Regulations

(2) Prohibitions against certain investments and excess business holdings Prohibitions against investments that jeopardizethe exempt purpose of the trust within the meaning of sect 4944 as modified by sect 4947(a)(2)(A) and against retaining anyexcess business holdings within the meaning of sect 4943 as modified by sect 4947(a)(2)(A) are required if the trust providesfor payment of any part of a unitrust amount to an organization described in sect 170(c) and gift andor estate tax charitabledeductions are sought for the organizationrsquos interest in the unitrust amount See sect 4947(b)(3) See section 601 of thisrevenue procedure for an alternate provision that provides for payment of part of the unitrust amount to an organizationdescribed in sect 170(c)

(3) Trust to continue in existence for benefit of charity The governing instrument requirements of sect 508(e) must be includedin the trust instrument if after the termination of the unitrust period (i) the trust instrument provides that the trust shallcontinue in existence for the benefit of the charitable remainderman and as a result the trust will become subject to theprovisions of sect 4947(a)(1) and (ii) the trust will be treated as a private foundation within the meaning of sect 509(a) as modi-fied by sect 4947(a)(1) Except as provided in paragraph 8 of the sample trust the trust instrument may limit the application ofthe provisions of sect 508(e) to the period after the termination of the unitrust period when the trust continues in existence forthe benefit of the charitable remainderman Note that when the trust provides for the trust corpus to be retained in wholeor in part in trust for the charitable remainderman the higher deductibility limitations in sect 170(b)(1)(A) for the income taxcharitable deduction will not be available (even if the charitable remainderman is restricted to a public charity) because thecontribution of the trust corpus is made ldquofor the use ofrdquo rather than ldquotordquo the charitable remainderman See sect 1170Andash8(a)and (b)


SECTION 6 ALTERNATE PROVISIONS FOR SAMPLE INTER VIVOS CHARITABLE REMAINDERUNITRUST mdash ONE LIFE

01 Payment of Part of the Unitrust Amount to an Organization Described in sect 170(c)

(1) Explanation An organization described in sect 170(c) may receive part but not all of any unitrust amount Section664(d)(2)(A) If a gift tax charitable deduction and if needed an estate tax charitable deduction are sought for the presentvalue of the unitrust interest passing to a charitable organization the trust instrument must contain additional provisionsFirst the trust instrument must specify the portion of each unitrust payment that is payable to the noncharitable recipientand to the charitable organization described in sectsect 170(c) 2522(a) and if needed sect 2055(a) Second the trust instrumentmust contain a means for selecting an alternative qualified charitable organization if the designated organization is not aqualified organization at the time when any unitrust amount is to be paid to it Third the trust instrument must containprohibitions against investments that jeopardize the exempt purpose of the trust within the meaning of sect 4944 as modifiedby sect 4947(a)(2)(A) and against retaining any excess business holdings within the meaning of sect 4943 as modified bysect 4947(a)(2)(A)

(2) Instructions for use(a) Replace paragraph 2 Payment of Unitrust Amount of the sample trust with the following paragraph

Payment of Unitrust Amount The unitrust amount is equal to [a number no less than 5 and no more than 50] percent ofthe net fair market value of the assets of the trust valued as of the first day of each taxable year of the trust (hereinafterldquothe valuation daterdquo) In each taxable year of the trust during the unitrust period the Trustee shall pay [the percentageof the unitrust amount payable to the noncharitable recipient] percent of the unitrust amount to [permissible recipient](hereinafter ldquothe Recipientrdquo) and [the percentage of the unitrust amount payable to the charitable recipient] percentof the unitrust amount to [an organization described in sectsect170(c) 2055(a) and 2522(a) of the Code] (hereinafter ldquotheCharitable Recipientrdquo) The first day of the unitrust period shall be the date property is first transferred to the trustand the last day of the unitrust period shall be the date of the Recipientrsquos death If the Charitable Recipient is not anorganization described in sectsect 170(c) 2055(a) and 2522(a) of the Code at the time when any unitrust payment is tobe distributed to it then the Trustee shall distribute that unitrust payment to one or more organizations described insectsect 170(c) 2055(a) and 2522(a) of the Code as the Trustee shall select and in the proportions as the Trustee shalldecide in the Trusteersquos sole discretion The unitrust amount shall be paid in equal quarterly installments at the endof each calendar quarter from income and to the extent income is not sufficient from principal Any income of thetrust for a taxable year in excess of the unitrust amount shall be added to principal If for any year the net fair marketvalue of the trust assets is incorrectly determined then within a reasonable period after the correct value is finallydetermined the Trustee shall pay to the Recipient and the Charitable Recipient (in the case of an undervaluation)or receive from the Recipient and the Charitable Recipient (in the case of an overvaluation) an amount equal to thedifference between the unitrust amount(s) properly payable and the unitrust amount(s) actually paid

(b) Replace the first parenthetical in paragraph 4 Distribution to Charity of the sample trust with the following parenthetical(other than any amount due the Recipient and the Charitable Recipient under the terms of this trust)

(c) Replace each reference to ldquothe Recipientrdquo in paragraph 6 Deferral of the Unitrust Payment Allocable to TestamentaryTransfer of the sample trust with a reference to ldquothe Recipient and the Charitable Recipientrdquo

(d) Add the following sentence after the first and only sentence in paragraph 8 Prohibited Transactions of the sample trustThe Trustee shall not make any investments that jeopardize the exempt purpose of the trust within the meaning ofsect 4944 of the Code as modified by sect 4947(a)(2)(A) of the Code or retain any excess business holdings within themeaning of sect 4943 of the Code as modified by sect 4947(a)(2)(A) of the Code

02 Qualified Contingency

(1) Explanation Under sect 664(f) payment of the unitrust amount may terminate upon the earlier of the occurrence of a qualifiedcontingency (as defined in sect 664(f)(3)) or the death of the recipient The amount of the charitable deduction however willbe determined without regard to a qualified contingency See sect 664(f)(2)

(2) Instructions for use Replace the second sentence of paragraph 2 Payment of Unitrust Amount of the sample trust withthe following sentence

The first day of the unitrust period shall be the date property is first transferred to the trust and the last day of the unitrustperiod shall be the date of the Recipientrsquos death or if earlier the date on which occurs the [qualified contingency]

03 Last Unitrust Payment to the Recipient

(1) Explanation As an alternative to prorating the unitrust amount in the taxable year of the recipientrsquos death the obligationto pay the unitrust amount may terminate with the last regular payment preceding the recipientrsquos death However the fact


that the recipient may not receive a final prorated payment shall not be taken into account for purposes of determiningthe present value of the remainder interest Section 1664ndash3(a)(5)(i) Note that although the obligation to pay the unitrustamount may terminate with the last regular payment preceding the recipientrsquos death the trustee must pay to the recipientrsquosestate any amounts allocated to the payments payable before the recipientrsquos death that are due as a result of an adjustmentto the unitrust amount payable for that year as in the case of an undervaluation or an additional contribution

(2) Instructions for use Replace paragraph 3 Proration of Unitrust Amount of the sample trust with the following paragraphProration of Unitrust Amount For a short taxable year the Trustee shall prorate on a daily basis the unitrust amountdescribed in paragraph 2 or if an additional contribution is made to the trust the unitrust amount described in paragraph5 In the taxable year of the trust during which the unitrust period ends however the obligation of the Trustee to pay theunitrust amount shall terminate with the last regular quarterly installment preceding the death of the Recipient

04 Restricting the Charitable Remainderman to a Public Charity

(1) Explanation The amount of the donorrsquos charitable contribution deduction for income tax purposes may be limited bythe percentage of income limitations described in sect 170(b) In general a larger charitable contribution deduction may beavailable for income tax purposes for a contribution to a charitable organization described in sect 170(b)(1)(A) than for acontribution to a private foundation (other than a private foundation described in sect 170(b)(1)(E)) See sect 170(b) and RevRul 79ndash368 1979ndash2 CB 109 To take advantage of the larger charitable contribution deduction for income tax purposesa donor of an inter vivos CRUT may wish to restrict the charitable remainderman to an organization that is described insect 170(b)(1)(A) as well as sectsect 170(c) 2055(a) and 2522(a) (referred to herein as a ldquopublic charityrdquo)

(2) Instructions for use To restrict the charitable remainderman to a public charity each and every time the phrase ldquoan organi-zation described in sectsect 170(c) 2055(a) and 2522(a) of the Coderdquo appears in the sample trust replace it with the phrase ldquoanorganization described in sectsect 170(b)(1)(A) 170(c) 2055(a) and 2522(a) of the Coderdquo

05 Retaining the Right to Substitute the Charitable Remainderman

(1) Explanation The donor may retain the right to substitute another charitable remainderman for the charitable remaindermannamed in the trust instrument See Rev Rul 76ndash8 1976ndash1 CB 179 Note however that the retention of this right willcause the gift of the remainder interest to be incomplete for gift tax purposes See sect 252511ndash2(c) and Rev Rul 77ndash2751977ndash2 CB 346

(2) Instructions for use Insert the following sentence between the first and last sentences of paragraph 4 Distribution to Char-ity of the sample trust

The Donor reserves the right to designate at any time and from time to time in lieu of the Charitable Organizationidentified above one or more organizations described in sectsect 170(c) 2055(a) and 2522(a) of the Code as the charitableremainderman and shall make any such designation by giving written notice to the Trustee

06 Power of Appointment to Designate the Charitable Remainderman

(1) Explanation The trust instrument may grant the recipient a power of appointment to designate the charitable remaindermanSee Rev Rul 76ndash7 1976ndash1 CB 179

(2) Instructions for use Replace paragraph 4 Distribution to Charity of the sample trust with the following paragraphDistribution to Charity At the termination of the unitrust period the Trustee shall distribute all of the then principaland income of the trust (other than any amount due the Recipient under the terms of this trust) to one or more charitableorganizations described in sectsect 170(c) 2055(a) and 2522(a) of the Code as the Recipient shall appoint and direct by spe-cific reference to this power of appointment by inter vivos or testamentary instrument To the extent the Recipient failsto effectively exercise the power of appointment the principal and income not effectively appointed shall be distributedto one or more organizations described in sectsect 170(c) 2055(a) and 2522(a) of the Code as the Trustee shall select andin the proportions as the Trustee shall decide in the Trusteersquos sole discretion If an organization fails to qualify as anorganization described in sectsect 170(c) 2055(a) and 2522(a) of the Code at the time when any principal or income of thetrust is to be distributed to it then the Trustee shall distribute the then principal and income to one or more organizationsdescribed in sectsect 170(c) 2055(a) and 2522(a) of the Code as the Trustee shall select and in the proportions as the Trusteeshall decide in the Trusteersquos sole discretion

07 Net Income Method of Calculating the Unitrust Amount

(1) Explanation As an alternative to using the fixed percentage method of calculating the unitrust amount in paragraph 2 of thesample trust a CRUT may use the net income method for calculating the unitrust amount Under the net income methodthe unitrust amount is the lesser of a fixed percentage of the net fair market value of the trust assets valued annually or theamount of trust income for that year Section 664(d)(3)(A) and sect 1664ndash3(a)(1)(i)(b)(1) For purposes of determining the


amount of the charitable contribution the remainder interest is computed on the basis that an amount equal to the fixedpercentage unitrust amount is to be distributed each year without regard to the possibility that a smaller amount of trustincome may be the amount distributed Section 664(e)

(2) Definition of trust income For purposes of the methods described in sect 664(d)(3) trust income generally means incomeas defined under sect 643(b) and the applicable regulations Section 1664ndash3(a)(1)(i)(b)(3) Even if permitted by applicablestate law however trust income of a CRUT that uses the net income method the net income with make-up method or acombination of methods of determining the unitrust amount may not be determined by reference to a fixed percentage ofthe net fair market value of the trust property In addition although certain proceeds from the sale or exchange of assetsmust be allocated to principal and not to trust income other such proceeds may be allocated to trust income pursuant to theterms of the governing instrument if not prohibited by applicable local law A discretionary power to make this allocationmay be granted to the trustee under the terms of the governing instrument but only to the extent that the applicable statestatute permits the trustee to make adjustments between income and principal to treat beneficiaries impartially Section1664ndash3(a)(1)(i)(b)(3) A definition of trust income that is consistent with these requirements may but need not be includedin the trust instrument

(3) Instructions for use(a) Each and every time a reference to ldquosect 664(d)(2)rdquo appears in the sample trust replace it with a reference to ldquosect 664(d)(2)

and (d)(3)rdquo(b) Replace the first four sentences of paragraph 2 Payment of Unitrust Amount of the sample trust with the following

In each taxable year of the trust during the unitrust period the Trustee shall pay to [permissible recipient] (hereinafterldquothe Recipientrdquo) a unitrust amount equal to the lesser of (a) a fixed percentage amount equal to [a number no lessthan 5 and no more than 50] percent of the net fair market value of the assets of the trust valued as of the valuationdate (hereinafter ldquothe fixed percentage amount described in (a) of paragraph 2rdquo) or (b) the trust income for the taxableyear as defined in sect 643(b) of the Code and the applicable regulations The valuation date is the first day of eachtaxable year of the trust The first day of the unitrust period shall be the date property is first transferred to the trustand the last day of the unitrust period shall be the date of the Recipientrsquos death The unitrust amount shall be paid inequal quarterly installments at the end of each calendar quarter from income Any income of the trust for a taxableyear in excess of the unitrust amount shall be added to principal

(c) Replace paragraph 3 Proration of Unitrust Amount of the sample trust with the following paragraphProration of Unitrust Amount For a short taxable year and for the taxable year during which the unitrust periodends the Trustee shall prorate on a daily basis the fixed percentage amount described in (a) of paragraph 2 or if anadditional contribution is made to the trust the fixed percentage amount described in (a) of paragraph 5 In such ayear this prorated fixed percentage amount shall be used in place of the fixed percentage amount described in (a) ofparagraph 2 or in (a) of paragraph 5 to determine the unitrust amount payable for that year

(d) Replace paragraph 5 Additional Contributions of the sample trust with the following paragraphAdditional Contributions Notwithstanding paragraph 2 if any additional contributions are made to the trust afterthe initial contribution the unitrust amount for the year in which any additional contribution is made shall be equalto the lesser of (a) a fixed percentage amount equal to [same percentage used in (a) of paragraph 2] percent of thesum of (1) the net fair market value of the trust assets as of the valuation date (excluding the assets so added andany post-contribution income from and appreciation on such assets during that year) and (2) for each additionalcontribution during the year the fair market value of the assets so added as of the valuation date (including anypost-contribution income from and appreciation on such assets through the valuation date) multiplied by a fractionthe numerator of which is the number of days in the period that begins with the date of contribution and ends withthe earlier of the last day of the taxable year or the last day of the unitrust period and the denominator of which is thenumber of days in the period that begins with the first day of such taxable year and ends with the earlier of the lastday in such taxable year or the last day of the unitrust period (hereinafter ldquothe fixed percentage amount described in(a) of paragraph 5rdquo) or (b) the trust income for the taxable year as defined in sect 643(b) of the Code and the applicableregulations In a taxable year in which an additional contribution is made on or after the valuation date the assets soadded shall be valued as of the date of contribution without regard to any post-contribution income or appreciationrather than as of the valuation date

08 Net Income with Make-up Method of Calculating the Unitrust Amount

(1) Explanation As an alternative to using the fixed percentage method of calculating the unitrust amount in paragraph 2 ofthe sample trust a CRUT may use the net income with make-up method for calculating the unitrust amount Under thenet income with make-up method the unitrust amount consists of two components (i) the amount determined under thenet income method (as described in section 607 of this revenue procedure) and (ii) the amount of trust income that is inexcess of the fixed percentage amount for that year but only to the extent that the aggregate of the unitrust amounts paidto the recipient in prior years was less than the amounts that would have been paid to the recipient if the unitrust amount


had been computed using the fixed percentage method Section 664(d)(3)(B) and sect 1664ndash3(a)(1)(i)(b)(2) For purposesof determining the amount of the charitable contribution the remainder interest is computed on the basis that an amountequal to the fixed percentage unitrust amount is to be distributed each year without regard to the possibility that a smaller orlarger amount of trust income may be the amount distributed Section 664(e) See section 607(2) of this revenue procedurefor rules relating to the definition of trust income



In each taxable year of the trust during the unitrust period the Trustee shall pay to [permissible recipient] (hereinafterldquothe Recipientrdquo) a unitrust amount equal to the lesser of (a) a fixed percentage amount equal to [a number no less than5 and no more than 50] percent of the net fair market value of the assets of the trust valued as of the valuation date(hereinafter ldquothe fixed percentage amount described in (a) of paragraph 2rdquo) or (b) the trust income for the taxable yearas defined in sect 643(b) of the Code and the applicable regulations The unitrust amount for a taxable year shall alsoinclude any amount of trust income for the year that is in excess of [the fixed percentage amount determined under(a) of this paragraph for the year] but only to the extent that the aggregate of the amounts paid to the Recipient inprior years was less than the aggregate of the amounts determined for all prior years under (a) of this paragraph and(a) of paragraph 5 The valuation date is the first day of each taxable year of the trust The first day of the unitrustperiod shall be the date property is first transferred to the trust and the last day of the unitrust period shall be the dateof the Recipientrsquos death The unitrust amount shall be paid in equal quarterly installments at the end of each calendarquarter from income Any income of the trust for a taxable year in excess of the unitrust amount shall be added toprincipal


(d) Replace paragraph 5 Additional Contributions of the sample trust with the following paragraphAdditional Contributions Notwithstanding paragraph 2 if any additional contributions are made to the trust after theinitial contribution the unitrust amount for the year in which any additional contribution is made shall be equal to thelesser of (a) a fixed percentage amount equal to [same percentage used in (a) of paragraph 2] percent of the sum of(1) the net fair market value of the trust assets as of the valuation date (excluding the assets so added and any post-contribution income from and appreciation on such assets during that year) and (2) for each additional contributionduring the year the fair market value of the assets so added as of the valuation date (including any post-contributionincome from and appreciation on such assets through the valuation date) multiplied by a fraction the numerator ofwhich is the number of days in the period that begins with the date of contribution and ends with the earlier of the lastday of the taxable year or the last day of the unitrust period and the denominator of which is the number of days inthe period that begins with the first day of such taxable year and ends with the earlier of the last day in such taxableyear or the last day of the unitrust period (hereinafter ldquothe fixed percentage amount described in (a) of paragraph 5rdquo)or (b) the trust income for the taxable year as defined in sect 643(b) of the Code and the applicable regulations Theunitrust amount for that year shall also include any amount of trust income for the year that is in excess of [the fixedpercentage amount determined under (a) of this paragraph for the year] but only to the extent that the aggregate ofthe amounts paid to the Recipient in prior years was less than the aggregate of the amounts determined for all prioryears under (a) of paragraph 2 and (a) of this paragraph In a taxable year in which an additional contribution is madeon or after the valuation date the assets so added shall be valued as of the date of contribution without regard to anypost-contribution income or appreciation rather than as of the valuation date

09 Combination of Methods for Calculating the Unitrust Amount

(1) Explanation The net income method (described in section 607 of this revenue procedure) or the net income with make-upmethod (described in section 608 of this revenue procedure) may be combined with the fixed percentage method for cal-culating the unitrust amount Section 1664ndash3(a)(1)(i)(c) More specifically the governing instrument may provide forpayment of the unitrust amount not less often than annually using the net income or the net income with make-up methodof calculation and then in the years following a permissible triggering event (as described in sect 1664ndash3(a)(1)(i)(c) and(d)) for payment of the unitrust amount using the fixed percentage method of calculation To provide for a one-time con-version from the net income or the net income with make-up method to the fixed percentage method of calculation thegoverning instrument must provide that (i) the change in method is triggered on a specific date or by a single event whose


occurrence is not discretionary with or within the control of the trustees or any other persons (ii) the change in methodoccurs at the beginning of the taxable year that immediately follows the taxable year during which the permissible triggeringevent occurs and (iii) following the trustrsquos conversion to the fixed percentage method the trust will pay at least annuallyto the recipient the amount described in sect 1664ndash3(a)(1)(i)(a) and no amount described in sect 1664ndash3(a)(1)(i)(b) Section1664ndash3(a)(1)(i)(c) Thus any make-up amount described in sect 1664ndash3(a)(1)(i)(b)(2) that is not paid by the beginning of thetaxable year immediately following the taxable year during which the permissible triggering event occurs shall be forfeitedby the recipient and added to principal

(2) Instructions for use to combine the net income and fixed percentage methods To convert from the net income method forcalculating the unitrust amount to the fixed percentage method after a permissible triggering event

(a) Each and every time a reference to ldquosect 664(d)(2)rdquo appears in the sample trust replace it with a reference to ldquosect 664(d)(2)and (d)(3)rdquo

(b) Replace paragraph 2 Payment of Unitrust Amount of the sample trust with the following paragraphPayment of Unitrust Amount

(i) Unitrust amount determined by net income method In each taxable year of the trust during the unitrust periodthe Trustee shall pay to [permissible recipient] (hereinafter ldquothe Recipientrdquo) a unitrust amount equal to the lesserof (a) a fixed percentage amount equal to [a number no less than 5 and no more than 50] percent of the net fairmarket value of the assets of the trust valued as of the valuation date (hereinafter ldquothe fixed percentage amountdescribed in (a) of paragraph 2(i)rdquo) or (b) the trust income for the taxable year as defined in sect 643(b) of the Codeand the applicable regulations The unitrust amount shall be paid in equal quarterly installments at the end of eachcalendar quarter from income Any income of the trust for a taxable year in excess of the unitrust amount shall beadded to principal

(ii) Conversion to fixed percentage method of determining unitrust amount Notwithstanding paragraph 2(i) upon theoccurrence of [permissible triggering event as described in sect 1664ndash3(a)(1)(i)(c) and (d) of the Income Tax Reg-ulations] (hereinafter ldquothe triggering eventrdquo) and effective as of the first day of the taxable year that immediatelyfollows the triggering event (hereinafter ldquothe effective date of the triggering eventrdquo) the Trustee shall pay to theRecipient in each remaining taxable year of the trust during the unitrust period a unitrust amount equal to [samepercentage used in (a) of paragraph 2(i)] percent of the net fair market value of the trust assets as of the valuationdate Beginning on the effective date of the triggering event the Trustee shall no longer pay the amount equal tothe lesser of (a) or (b) in paragraph 2(i) The unitrust amount shall be paid in equal quarterly installments at theend of each calendar quarter from income and to the extent income is not sufficient from principal Any incomeof the trust for a taxable year in excess of the unitrust amount shall be added to principal

(iii) In general The first day of the unitrust period shall be the date property is first transferred to the trust and thelast day of the unitrust period shall be the date of the Recipientrsquos death The valuation date is the first day of eachtaxable year of the trust If for any year the net fair market value of the trust assets is incorrectly determined thenwithin a reasonable period after the correct value is finally determined the Trustee shall pay to the Recipient (inthe case of an undervaluation) or receive from the Recipient (in the case of an overvaluation) an amount equal tothe difference between the unitrust amount(s) properly payable and the unitrust amount(s) actually paid

(c) Replace paragraph 3 Proration of Unitrust Amount of the sample trust with the following paragraphProration of Unitrust Amount

(i) Proration in years preceding the effective date of triggering event For a short taxable year before the effectivedate of the triggering event which may include the taxable year during which the unitrust period ends the Trusteeshall prorate on a daily basis the fixed percentage amount described in (a) of paragraph 2(i) or if an additionalcontribution is made to the trust the fixed percentage amount described in (a) of paragraph 5(i) In such a yearthis prorated fixed percentage amount shall be used in place of the fixed percentage amount described in (a) ofparagraph 2(i) or in (a) of paragraph 5(i) to determine the unitrust amount payable for that year

(ii) Proration on and after effective date of triggering event For a short taxable year beginning on or after the effectivedate of the triggering event which may include the taxable year during which the unitrust period ends the Trusteeshall prorate on a daily basis the unitrust amount described in paragraph 2(ii) or if an additional contribution ismade to the trust the unitrust amount described in paragraph 5(ii)

(d) Replace paragraph 5 Additional Contributions of the sample trust with the following paragraphAdditional Contributions

(i) Additional contributions made before effective date of triggering event Notwithstanding paragraph 2(i) if anyadditional contributions are made to the trust after the initial contribution and before the effective date of the trig-gering event the unitrust amount for the year in which the additional contribution is made shall be equal to thelesser of

(a) a fixed percentage amount equal to [same percentage used in (a) of paragraph 2(i)] percent of the sum of


(1) the net fair market value of the trust assets as of the valuation date (excluding the assets so added and anypost-contribution income from and appreciation on such assets during that year) and

(2) for each additional contribution during the year the fair market value of the assets so added as of the valuationdate (including any post-contribution income from and appreciation on such assets through the valuationdate) multiplied by a fraction the numerator of which is the number of days in the period that begins withthe date of contribution and ends with the earlier of the last day of the taxable year or the last day of theunitrust period and the denominator of which is the number of days in the period that begins with the firstday of such taxable year and ends with the earlier of the last day in such taxable year or the last day of theunitrust period

(hereinafter ldquothe fixed percentage amount described in (a) of paragraph 5(i)rdquo) or(b) the trust income for the taxable year as defined in sect 643(b) of the Code and the applicable regulations

In a taxable year in which an additional contribution is made on or after the valuation date the assets so added shallbe valued as of the date of contribution without regard to any post-contribution income or appreciation rather thanas of the valuation date

(ii) Additional contributions made on or after effective date of triggering event Notwithstanding paragraph 2(ii) if anyadditional contributions are made to the trust after the initial contribution and on or after the effective date of thetriggering event the unitrust amount described in paragraph 2(ii) for the year in which the additional contributionis made shall be [same percentage used in (a) of paragraph 2(i)] percent of the sum of

(a) the net fair market value of the trust assets as of the valuation date (excluding the assets so added and anypost-contribution income from and appreciation on such assets during that year) and

(b) for each additional contribution during the year the fair market value of the assets so added as of the valuationdate (including any post-contribution income from and appreciation on such assets through the valuation date)multiplied by a fraction the numerator of which is the number of days in the period that begins with the dateof contribution and ends with the earlier of the last day of the taxable year or the last day of the unitrust periodand the denominator of which is the number of days in the period that begins with the first day of such taxableyear and ends with the earlier of the last day in such taxable year or the last day of the unitrust period

In a taxable year in which an additional contribution is made on or after the valuation date the assets so added shallbe valued as of the date of contribution without regard to any post-contribution income or appreciation rather thanas of the valuation date Beginning on the effective date of the triggering event the trustee shall no longer pay theamount equal to the lesser of (a) or (b) in paragraph 5(i)

(3) Instructions for use to combine the net income with make-up and fixed percentage methods To convert from the net incomewith make-up method for calculating the unitrust amount to the fixed percentage method after a permissible triggeringevent



(i) Unitrust amount determined by net income with make-up method In each taxable year of the trust during theunitrust period the Trustee shall pay to [permissible recipient] (hereinafter ldquothe Recipientrdquo) a unitrust amountequal to the lesser of (a) a fixed percentage amount equal to [a number no less than 5 and no more than 50] percentof the net fair market value of the assets of the trust valued as of the valuation date (hereinafter ldquothe fixed percentageamount described in (a) of paragraph 2(i)rdquo) or (b) the trust income for the taxable year as defined in sect 643(b) ofthe Code and the applicable regulations The unitrust amount for a taxable year shall also include any amount oftrust income for the year that is in excess of [the fixed percentage amount determined under (a) of paragraph 2(i)for the year] but only to the extent that the aggregate of the amounts paid to the Recipient in prior years was lessthan the aggregate of the amounts determined for all prior years under (a) of paragraph 2(i) and (a) of paragraph5(i) The unitrust amount shall be paid in equal quarterly installments at the end of each calendar quarter fromincome Any income of the trust for a taxable year in excess of the unitrust amount shall be added to principal

(ii) Conversion to fixed percentage method of determining unitrust amount Notwithstanding paragraph 2(i) upon theoccurrence of [permissible triggering event as described in sect 1664ndash3(a)(1)(i)(c) and (d) of the Income Tax Reg-ulations] (hereinafter ldquothe triggering eventrdquo) and effective as of the first day of the taxable year that immediatelyfollows the triggering event (hereinafter ldquothe effective date of the triggering eventrdquo) the Trustee shall pay to theRecipient in each remaining taxable year of the trust during the unitrust period a unitrust amount equal to [samepercentage used in (a) of paragraph 2(i)] percent of the net fair market value of the trust assets as of the valuationdate Beginning on the effective date of the triggering event the Trustee shall no longer pay the amount equalto the lesser of (a) or (b) in paragraph 2(i) and shall not pay any amount of trust income described in the secondsentence of paragraph 2(i) The unitrust amount shall be paid in equal quarterly installments at the end of each


calendar quarter from income and to the extent income is not sufficient from principal Any income of the trustfor a taxable year in excess of the unitrust amount shall be added to principal











The unitrust amount for that year shall also include any amount of trust income for the year that is in excess of[the fixed percentage amount determined under (a) of paragraph 5(i) for the year] but only to the extent that theaggregate of the amounts paid to the Recipient in prior years was less than the aggregate of the amounts determinedfor all prior years under (a) of paragraph 2(i) and (a) of this paragraph In a taxable year in which an additionalcontribution is made on or after the valuation date the assets so added shall be valued as of the date of contributionwithout regard to any post-contribution income or appreciation rather than as of the valuation date





In a taxable year in which an additional contribution is made on or after the valuation date the assets so added shallbe valued as of the date of contribution without regard to any post-contribution income or appreciation rather thanas of the valuation date Beginning on the effective date of the triggering event the Trustee shall no longer paythe amount equal to the lesser of (a) or (b) in paragraph 5(i) and shall not pay any amount of income described inthe second sentence of paragraph 5(i)

SECTION 7 EFFECT ON OTHER REVENUE PROCEDURES

Rev Proc 89ndash20 1989ndash1 CB 841 and section 4 of Rev Proc 90ndash31 are superseded

DRAFTING INFORMATION

The principal authors of this revenue procedure are Karlene M Lesho and Stephanie N Bland of the Office of Associate ChiefCounsel (Passthroughs and Special Industries) For further information regarding this revenue procedure contact Karlene M Leshoor Stephanie N Bland at (202) 622ndash7830 (not a toll-free call)

26 CFR 601201 Rulings and determination letters(Also Part I sectsect 170 664 2055 2522 1170Andash6 1664ndash1 1664ndash3 1664ndash4 202055ndash2 252522(c)ndash3)


SECTION 1 PURPOSE

This revenue procedure contains an annotated sample declaration of trust and alternate provisions that meet the requirements ofsect 664(d)(2) and (d)(3) of the Internal Revenue Code for an inter vivos charitable remainder unitrust (CRUT) providing for unitrustpayments for a term of years followed by the distribution of trust assets to a charitable remainderman


Previously the Internal Revenue Service issued sample trust instruments for certain types of CRUTs The Service is updating thepreviously issued samples and issuing new samples for additional types of CRUTs annotations and alternate sample provisions areincluded as further guidance In addition to the sample trust instrument included in this revenue procedure for an inter vivos CRUTproviding for unitrust payments for a term of years samples are provided in other separate revenue procedures for

(a) an inter vivos CRUT providing for unitrust payments for one measuring life (see Rev Proc 2005ndash52 superseding RevProc 89ndash20 1989ndash1 CB 841 and section 4 of Rev Proc 90ndash31 1990ndash1 CB 539)

(b) an inter vivos CRUT providing for unitrust payments payable consecutively for two measuring lives (see Rev Proc2005ndash54 superseding section 4 of Rev Proc 90ndash30 1990ndash1 CB 534 and section 5 of Rev Proc 90ndash31







Section 4 of this revenue procedure provides a sample declaration of trust for an inter vivos CRUT providing for a term of yearsunitrust period that is created by an individual who is a citizen or resident of the United States Section 5 of this revenue procedureprovides annotations to the provisions of the sample trust Section 6 of this revenue procedure provides samples of certain alternateprovisions concerning (01) the payment of part of the unitrust amount to an organization described in sect 170(c) (02) the appor-tionment of the unitrust amount among members of a named class in the discretion of the trustee (03) a qualified contingency(04) the restriction of the charitable remainderman to a public charity (05) a retained right to substitute the charitable remainder-man (06) a power of appointment to designate the charitable remainderman (07) the net income method of calculating the unitrustamount (08) the net income with make-up method of calculating the unitrust amount and (09) a combination of methods for calcu-lating the unitrust amount


For transfers to a qualifying CRUT as defined in sect 664(d)(2) and if applicable sect 664(d)(3) the remainder interest will be de-ductible by a citizen or resident of the United States under sectsect 170(f)(2)(A) 2055(e)(2)(A) and 2522(c)(2)(A) for income estate andgift tax purposes respectively if the other requirements of sectsect 170(f)(2)(A) 2055(e)(2)(A) and 2522(c)(2)(A) (that is the require-ments not relating to the provisions of the governing instrument) also are met The Service will recognize a trust as a qualified CRUTmeeting all of the requirements of sect 664(d)(2) and if applicable sect 664(d)(3) if the trust operates in a manner consistent with the termsof the trust instrument if the trust is a valid trust under applicable local law and if the trust instrument (i) is substantially similar tothe sample in section 4 of this revenue procedure or (ii) properly integrates one or more alternate provisions from section 6 of thisrevenue procedure into a document substantially similar to the sample in section 4 of this revenue procedure A trust that containssubstantive provisions in addition to those provided in section 4 of this revenue procedure (other than properly integrated alternateprovisions from section 6 of this revenue procedure or provisions necessary to establish a valid trust under applicable local law that arenot inconsistent with the applicable federal tax requirements) or that omits any of the provisions of section 4 of this revenue procedure(unless an alternate provision from section 6 of this revenue procedure is properly integrated) will not necessarily be disqualified butneither will that trust be assured of qualification under the provisions of this revenue procedure The Service generally will not issuea letter ruling on whether an inter vivos trust created by an individual and having a term of years unitrust period qualifies as a CRUTThe Service however generally will issue letter rulings on the effect of substantive trust provisions other than those contained insections 4 and 6 of this revenue procedure on the qualification of a trust as a CRUT

SECTION 4 SAMPLE INTER VIVOS CHARITABLE REMAINDER UNITRUST mdash TERM OF YEARS

On this day of 20 I (hereinafter ldquothe Donorrdquo) desiring to establish a char-itable remainder unitrust within the meaning of Rev Proc 2005ndash53 and sect 664(d)(2) of the Internal Revenue Code (hereinafter ldquotheCoderdquo) hereby enter into this trust agreement with as the initial trustee (hereinafter ldquothe Trusteerdquo) This trust shallbe known as the Charitable Remainder Unitrust


2 Payment of Unitrust Amount In each taxable year of the trust during the unitrust period the Trustee shall pay to [permissiblerecipient] (hereinafter ldquothe Recipientrdquo) a unitrust amount equal to [a number no less than 5 and no more than 50] percent of the net fairmarket value of the assets of the trust valued as of the first day of each taxable year of the trust (hereinafter ldquothe valuation daterdquo) Theunitrust period shall be a period of [a number not more than 20] years The first day of the unitrust period shall be the date propertyis first transferred to the trust and the last day of the unitrust period shall be the day preceding the [ordinal number correspondingto the length of the unitrust period] anniversary of that date The unitrust amount shall be paid in equal quarterly installments at theend of each calendar quarter from income and to the extent income is not sufficient from principal Any income of the trust for ataxable year in excess of the unitrust amount shall be added to principal If for any year the net fair market value of the trust assetsis incorrectly determined then within a reasonable period after the correct value is finally determined the Trustee shall pay to theRecipient (in the case of an undervaluation) or receive from the Recipient (in the case of an overvaluation) an amount equal to thedifference between the unitrust amount(s) properly payable and the unitrust amount(s) actually paid













SECTION 5 ANNOTATIONS REGARDING SAMPLE INTER VIVOS CHARITABLE REMAINDERUNITRUST mdash TERM OF YEARS






(4) Trustee provisions Alternate or successor trustees may be designated in the trust instrument In addition the trust instru-ment may contain other administrative provisions relating to the trusteersquos duties and powers as long as the provisions do notconflict with the rules governing charitable remainder trusts under sect 664 and the regulations thereunder Note that certainpowers given to certain persons serving as trustee may cause the trustee to be treated as the owner of the trust under subpartE and thus disqualify the trust as a charitable remainder trust See sect 1664ndash1(a)(4)



(1) Permissible term The period for which the unitrust amount is payable must not exceed 20 years Section 1664ndash3(a)(5)Thus for example the unitrust period of a CRUT for a term of 20 years will end on the day preceding the twentieth an-niversary of the date the trust was created

(2) Permissible recipients For a CRUT having a term of years unitrust period the unitrust amount must generally be paid toa named person or persons (within the meaning of sect 7701(a)(1)) If the unitrust amount is to be paid to an individual orindividuals all the individuals must be living at the time of the creation of the trust The unitrust amount may be payable tothe estate or heirs of a named recipient who dies prior to the expiration of the term of years See Rev Rul 74ndash39 1974ndash1CB 156 The unitrust amount may be payable to members of a named class and because the unitrust period is for a termof years all of the members of the class need not be living or ascertainable at the creation of the trust An organizationdescribed in sect 170(c) may receive part but not all of the unitrust amount Section 664(d)(2)(A) and sect 1664ndash3(a)(3)(i) Seesection 601 of this revenue procedure for an alternate provision that provides for payment of part of the unitrust amount toan organization described in sect 170(c)

(3) Multiple noncharitable recipients Generally if the unitrust amount is payable to more than one person the trust instrumentshould describe the interest of each person See section 602 of this revenue procedure for an alternate provision providingfor the apportionment of the unitrust amount among members of a named class in the discretion of the trustee





(8) Payment of unitrust amount by close of taxable year Generally the unitrust amount for any taxable year if computed underthe fixed percentage method must be paid before the close of the taxable year for which it is due For circumstances underwhich the unitrust amount computed under the fixed percentage method may be paid within a reasonable time after the


close of the taxable year see sect 1664ndash3(a)(1)(i)(g) and (k) See section 506(2) of this revenue procedure for additionalinformation regarding the deferral of the unitrust payment allocable to a testamentary transfer



03 Annotation for Paragraph 3 Proration of Unitrust Amount of the Sample Trust











(2) Proration of additional contributions Paragraph 5 Additional Contributions of the sample trust provides a formula fordetermining the unitrust amount in each year that an additional contribution is made to the CRUT If an additional con-


tribution is made in a short taxable year or in the taxable year during which the unitrust period ends the unitrust amountcomputed under paragraph 5 of the sample trust must be prorated pursuant to paragraph 3 Proration of Unitrust Amountof the sample trust






(2) Testamentary additions If the donor is not the recipient and the donor makes an additional contribution at death wherebythe obligation to pay the unitrust amount with respect to any property passing to the trust by reason of the donorrsquos deathbegins as of the date of the donorrsquos death the requirement to pay the portion of the unitrust amount allocable to that contri-bution may be deferred pursuant to the provisions of sect 1664ndash1(a)(5)(i) The deferral provision in paragraph 6 of the sampletrust uses the method for computing deferred payments that is provided in sect 1664ndash1(a)(5)(i) Note that sect 1664ndash1(a)(5)(ii)provides an alternate method for determining the amount described in sect 1664ndash1(a)(5)(i)(b) ie the unitrust amountspayable plus interest on those amounts Rev Rul 92ndash57 1992ndash2 CB 123 provides sample language to be included inthe governing instrument if the alternate method set forth in sect 1664ndash1(a)(5)(ii) for determining the amount described insect 1664ndash1(a)(5)(i)(b) is selected






(1) Payment of the unitrust amount Payment of the unitrust amount to the recipient is not considered an act of self-dealingwithin the meaning of sect 4941(d) as modified by sect 4947(a)(2)(A) or a taxable expenditure within the meaning of sect 4945(d)as modified by sect 4947(a)(A) Section 534947ndash1(c)(2) of the Foundation and Similar Excise Taxes Regulations

(2) Prohibitions against certain investments and excess business holdings Prohibitions against investments that jeopardizethe exempt purpose of the trust within the meaning of sect 4944 as modified by sect 4947(a)(2)(A) and against retaining anyexcess business holdings within the meaning of sect 4943 as modified by sect 4947(a)(2)(A) are required if the trust provides


for payment of any part of a unitrust amount to an organization described in sect 170(c) and gift andor estate tax charitabledeductions are sought for the organizationrsquos interest in the unitrust amount See sect 4947(b)(3) See section 601 of thisrevenue procedure for an alternate provision that provides for payment of part of the unitrust amount to an organizationdescribed in sect 170(c)


SECTION 6 ALTERNATE PROVISIONS FOR SAMPLE INTER VIVOS CHARITABLE REMAINDERUNITRUST mdash TERM OF YEARS




Payment of Unitrust Amount The unitrust amount is equal to [a number no less than 5 and no more than 50] percent ofthe net fair market value of the assets of the trust valued as of the first day of each taxable year of the trust (hereinafterldquothe valuation daterdquo) In each taxable year of the trust during the unitrust period the Trustee shall pay [the percentageof the unitrust amount payable to the noncharitable recipient] percent of the unitrust amount to [permissible recipient](hereinafter ldquothe Recipientrdquo) and [the percentage of the unitrust amount payable to the charitable recipient] percentof the unitrust amount to [an organization described in sectsect 170(c) 2055(a) and 2522(a) of the Code] (hereinafter ldquotheCharitable Recipientrdquo) The unitrust period shall be a period of [a number not more than 20] years The first day ofthe unitrust period shall be the date property is first transferred to the trust and the last day of the unitrust period shallbe the day preceding the [ordinal number corresponding to the length of the unitrust period] anniversary of that dateIf the Charitable Recipient is not an organization described in sectsect 170(c) 2055(a) and 2522(a) of the Code at the timewhen any unitrust payment is to be distributed to it then the Trustee shall distribute that unitrust payment to one ormore organizations described in sectsect 170(c) 2055(a) and 2522(a) of the Code as the Trustee shall select and in theproportions as the Trustee shall decide in the Trusteersquos sole discretion The unitrust amount shall be paid in equalquarterly installments at the end of each calendar quarter from income and to the extent income is not sufficient fromprincipal Any income of the trust for a taxable year in excess of the unitrust amount shall be added to principal If forany year the net fair market value of the trust assets is incorrectly determined then within a reasonable period afterthe correct value is finally determined the Trustee shall pay to the Recipient and the Charitable Recipient (in the caseof an undervaluation) or receive from the Recipient and the Charitable Recipient (in the case of an overvaluation) anamount equal to the difference between the unitrust amount(s) properly payable and the unitrust amount(s) actuallypaid


(c) Replace each reference to ldquothe Recipientrdquo in paragraph 6 of the sample trust Deferral of the Unitrust Payment Allocableto Testamentary Transfer with a reference to ldquothe Recipient and the Charitable Recipientrdquo

(d) Add the following sentence after the first and only sentence in paragraph 8 Prohibited Transactions of the sample trust


The Trustee shall not make any investments that jeopardize the exempt purpose of the trust within the meaning ofsect 4944 of the Code as modified by sect 4947(a)(2)(A) of the Code or retain any excess business holdings within themeaning of sect 4943 of the Code as modified by sect 4947(a)(2)(A) of the Code

02 Apportionment of the Unitrust Amount Among Members of a Named Class in the Discretion of theTrustee

(1) Explanation A trust is not a CRUT if any person has the power to alter the amount to be paid to any named person otherthan an organization described in sect 170(c) if the power would cause any person to be treated as the owner of the trust orany portion thereof if subpart E were applicable to the trust Section 1664ndash3(a)(3)(ii) See Rev Rul 77ndash73 1977ndash1 CB175 For example the donor would not be treated as the owner of any portion of a trust if the power is exercisable solelyby an independent trustee or trustees provided no person has the power to add beneficiaries to the class except to providefor after-born or after-adopted children Section 674(c) Trustees are independent for purposes of sect 674(c) if none of themis the donor or the donorrsquos spouse and if no more than half of them are related or subordinate parties who are subservientto the wishes of the donor However an independent trusteersquos discretionary power exercisable solely by that trustee toallocate the unitrust amount among the members of a class would cause the trustee to be treated as the owner of all or aportion of the trust under sect 678(a) if the trustee is a member of the class if the trustee may apply trust income or corpus tosatisfy the trusteersquos own legal obligation or if the trustee actually exercises the power to satisfy a support obligation owedby the trustee Therefore if any trustee is given the discretionary power exercisable solely by that trustee to allocate theunitrust amount among members of a class the trust instrument must provide that such trustee must be (i) independent(ii) not a member of the recipient class and (iii) prohibited from applying any part of the unitrust payment in satisfactionof the trusteersquos own legal obligation

(2) Instructions for use(a) Add the following sentence to the sample trust

Any trustee who is authorized in the trusteersquos sole discretion to allocate the unitrust amount among members of aRecipient class must be independent within the meaning of sect 674(c) of the Code and must not be a member of theRecipient class

(b) Replace the first sentence of paragraph 2 Payment of Unitrust Amount of the sample trust with the following threesentences

In each taxable year of the trust during the unitrust period the Trustee shall pay to a member or members of a classof persons comprised of [designated members of class] (hereinafter collectively ldquothe Recipientrdquo) a unitrust amountequal to [a number no less than 5 and no more than 50] percent of the net fair market value of the assets of the trustvalued as of the first day of each taxable year of the trust (hereinafter ldquothe valuation daterdquo) The Trustee may paythe unitrust amount to one or more members of the class in equal or unequal shares as the Trustee in the Trusteersquossole discretion from time to time may deem advisable The Trustee may not however apply any payment for theTrusteersquos own benefit or in satisfaction of any support or other legal obligation of the Trustee


(1) Explanation Under sect 664(f) payment of the unitrust amount may terminate upon the earlier of the occurrence of a qualifiedcontingency (as defined in sect 664(f)(3)) or the expiration of the term of years unitrust period The amount of the charitablededuction however will be determined without regard to a qualified contingency See sect 664(f)(2)

(2) Instructions for use Replace the second and third sentences of paragraph 2 Payment of Unitrust Amount of the sampletrust with the following two sentences

The unitrust period is a period of [not more than 20] years unless earlier terminated by the occurrence of [qualifiedcontingency] The first day of the unitrust period shall be the date property is first transferred to the trust and the last dayof the unitrust period shall be the day preceding the [ordinal number corresponding to the length of the unitrust period]anniversary of that date or if earlier the date on which occurs the [qualified contingency]










(1) Explanation The trust instrument may grant a recipient a power of appointment to designate the charitable remaindermanSee Rev Rul 76ndash7 1976ndash1 CB 179



(1) Explanation As an alternative to using the fixed percentage method of calculating the unitrust amount in paragraph 2 of thesample trust a CRUT may use the net income method for calculating the unitrust amount Under the net income methodthe unitrust amount is the lesser of a fixed percentage of the net fair market value of the trust assets valued annually or theamount of trust income for that year Section 664(d)(3)(A) and sect 1664ndash3(a)(1)(i)(b)(1) For purposes of determining theamount of the charitable contribution the remainder interest is computed on the basis that an amount equal to the fixedpercentage unitrust amount is to be distributed each year without regard to the possibility that a smaller amount of trustincome may be the amount distributed Section 664(e)



and (d)(3)rdquo(b) Replace the first five sentences of paragraph 2 Payment of Unitrust Amount of the sample trust with the following

In each taxable year of the trust during the unitrust period the Trustee shall pay to [permissible recipient] (hereinafterldquothe Recipientrdquo) a unitrust amount equal to the lesser of (a) a fixed percentage amount equal to [a number no less


than 5 and no more than 50] percent of the net fair market value of the assets of the trust valued as of the valuationdate (hereinafter ldquothe fixed percentage amount described in (a) of paragraph 2rdquo) or (b) the trust income for the taxableyear as defined in sect 643(b) of the Code and the applicable regulations The valuation date is the first day of eachtaxable year of the trust The unitrust period shall be a period of [a number not more than 20] years The first day ofthe unitrust period shall be the date property is first transferred to the trust and the last day of the unitrust period shallbe the day preceding the [ordinal number corresponding to the length of the unitrust period] anniversary of that dateThe unitrust amount shall be paid in equal quarterly installments at the end of each calendar quarter from incomeAny income of the trust for a taxable year in excess of the unitrust amount shall be added to principal




(1) Explanation As an alternative to using the fixed percentage method of calculating the unitrust amount in paragraph 2 ofthe sample trust a CRUT may use the net income with make-up method for calculating the unitrust amount Under thenet income with make-up method the unitrust amount consists of two components (i) the amount determined under thenet income method (as described in section 607 of this revenue procedure) and (ii) the amount of trust income that is inexcess of the fixed percentage amount for that year but only to the extent that the aggregate of the unitrust amounts paidto the recipient in prior years was less than the amounts that would have been paid to the recipient if the unitrust amounthad been computed using the fixed percentage method Section 664(d)(3)(B) and sect 1664ndash3(a)(1)(i)(b)(2) For purposesof determining the amount of the charitable contribution the remainder interest is computed on the basis that an amountequal to the fixed percentage unitrust amount is to be distributed each year without regard to the possibility that a smaller orlarger amount of trust income may be the amount distributed Section 664(e) See section 607(2) of this revenue procedurefor rules relating to the definition of trust income



In each taxable year of the trust during the unitrust period the Trustee shall pay to [permissible recipient] (hereinafterldquothe Recipientrdquo) a unitrust amount equal to the lesser of (a) a fixed percentage amount equal to [a number no lessthan 5 and no more than 50] percent of the net fair market value of the assets of the trust valued as of the valuationdate (hereinafter ldquothe fixed percentage amount described in (a) of paragraph 2rdquo) or (b) the trust income for the taxableyear as defined in sect 643(b) of the Code and the applicable regulations The unitrust amount for a taxable year shallalso include any amount of trust income for the year that is in excess of [the fixed percentage amount determinedunder (a) of this paragraph for the year] but only to the extent that the aggregate of the amounts paid to the Recipientin prior years was less than the aggregate of the amounts determined for all prior years under (a) of this paragraphand (a) of paragraph 5 The valuation date is the first day of each taxable year of the trust The unitrust period shallbe a period of [a number not more than 20] years The first day of the unitrust period shall be the date property


is first transferred to the trust and the last day of the unitrust period shall be the day preceding the [ordinal numbercorresponding to the length of the unitrust period] anniversary of that date The unitrust amount shall be paid in equalquarterly installments at the end of each calendar quarter from income Any income of the trust for a taxable year inexcess of the unitrust amount shall be added to principal




(1) Explanation The net income method (described in section 607 of this revenue procedure) or the net income with make-upmethod (described in section 608 of this revenue procedure) may be combined with the fixed percentage method for cal-culating the unitrust amount Section 1664ndash3(a)(1)(i)(c) More specifically the governing instrument may provide forpayment of the unitrust amount not less often than annually using the net income or the net income with make-up methodof calculation and then in the years following a permissible triggering event (as described in sect 1664ndash3(a)(1)(i)(c) and(d)) for payment of the unitrust amount using the fixed percentage method of calculation To provide for a one-time con-version from the net income or the net income with make-up method to the fixed percentage method of calculation thegoverning instrument must provide that (i) the change in method is triggered on a specific date or by a single event whoseoccurrence is not discretionary with or within the control of the trustees or any other persons (ii) the change in methodoccurs at the beginning of the taxable year that immediately follows the taxable year during which the permissible triggeringevent occurs and (iii) following the trustrsquos conversion to the fixed percentage method the trust will pay at least annuallyto the recipient the amount described in sect 1664ndash3(a)(1)(i)(a) and no amount described in sect 1664ndash3(a)(1)(i)(b) Section1664ndash3(a)(1)(i)(c) Thus any make-up amount described in sect 1664ndash3(a)(1)(i)(b)(2) that is not paid by the beginning of thetaxable year immediately following the taxable year during which the permissible triggering event occurs shall be forfeitedby the recipient and added to principal




(i) Unitrust amount determined by net income method In each taxable year of the trust during the unitrust periodthe Trustee shall pay to [permissible recipient] (hereinafter ldquothe Recipientrdquo) a unitrust amount equal to the lesserof (a) a fixed percentage amount equal to [a number no less than 5 and no more than 50] percent of the net fairmarket value of the assets of the trust valued as of the valuation date (hereinafter ldquothe fixed percentage amountdescribed in (a) of paragraph 2(i)rdquo) or (b) the trust income for the taxable year as defined in sect 643(b) of the Code


and the applicable regulations The unitrust amount shall be paid in equal quarterly installments at the end of eachcalendar quarter from income Any income of the trust for a taxable year in excess of the unitrust amount shall beadded to principal


(iii) In general The unitrust period shall be a period of [a number not more than 20] years The first day of the unitrustperiod shall be the date property is first transferred to the trust and the last day of the unitrust period shall be theday preceding the [ordinal number corresponding to the length of the unitrust period] anniversary of that dateThe valuation date is the first day of each taxable year of the trust If for any year the net fair market value of thetrust assets is incorrectly determined then within a reasonable period after the correct value is finally determinedthe Trustee shall pay to the Recipient (in the case of an undervaluation) or receive from the Recipient (in the caseof an overvaluation) an amount equal to the difference between the unitrust amount(s) properly payable and theunitrust amount(s) actually paid






(a) a fixed percentage amount equal to [same percentage used in (a) of paragraph 2(i)] percent of the sum of(1) the net fair market value of the trust assets as of the valuation date (excluding the assets so added and any

post-contribution income from and appreciation on such assets during that year) and(2) for each additional contribution during the year the fair market value of the assets so added as of the valuation

date (including any post-contribution income from and appreciation on such assets through the valuationdate) multiplied by a fraction the numerator of which is the number of days in the period that begins withthe date of contribution and ends with the earlier of the last day of the taxable year or the last day of theunitrust period and the denominator of which is the number of days in the period that begins with the firstday of such taxable year and ends with the earlier of the last day in such taxable year or the last day of theunitrust period












(ii) Conversion to fixed percentage method of determining unitrust amount Notwithstanding paragraph 2(i) upon theoccurrence of [permissible triggering event as described in sect 1664ndash3(a)(1)(i)(c) and (d) of the Income Tax Reg-ulations] (hereinafter ldquothe triggering eventrdquo) and effective as of the first day of the taxable year that immediatelyfollows the triggering event (hereinafter ldquothe effective date of the triggering eventrdquo) the Trustee shall pay to theRecipient in each remaining taxable year of the trust during the unitrust period a unitrust amount equal to [samepercentage used in (a) of paragraph 2(i)] percent of the net fair market value of the trust assets as of the valuationdate Beginning on the effective date of the triggering event the Trustee shall no longer pay the amount equalto the lesser of (a) or (b) in paragraph 2(i) and shall not pay any amount of trust income described in the secondsentence of paragraph 2(i) The unitrust amount shall be paid in equal quarterly installments at the end of eachcalendar quarter from income and to the extent income is not sufficient from principal Any income of the trustfor a taxable year in excess of the unitrust amount shall be added to principal












The unitrust amount for that year shall also include any amount of trust income for the year that is in excess of[the fixed percentage amount determined under (a) of paragraph 5(i) for the year] but only to the extent that theaggregate of the amounts paid to the Recipient in prior years was less than the aggregate of the amounts determinedfor all prior years under (a) of paragraph 2(i) and (a) of this paragraph 5(i) In a taxable year in which an additionalcontribution is made on or after the valuation date the assets so added shall be valued as of the date of contributionwithout regard to any post-contribution income or appreciation rather than as of the valuation date



(b) or each additional contribution during the year the fair market value of the assets so added as of the valuationdate (including any post-contribution income from and appreciation on such assets through the valuation date)multiplied by a fraction the numerator of which is the number of days in the period that begins with the dateof contribution and ends with the earlier of the last day of the taxable year or the last day of the unitrust periodand the denominator of which is the number of days in the period that begins with the first day of such taxableyear and ends with the earlier of the last day in such taxable year or the last day of the unitrust period

In a taxable year in which an additional contribution is made on or after the valuation date the assets so added shallbe valued as of the date of contribution without regard to any post-contribution income or appreciation rather thanas of the valuation date Beginning on the effective date of the triggering event the Trustee shall no longer pay theamount equal to the lesser of (a) or (b) in paragraph 5(i) and shall not pay any amount of trust income describedin the second sentence of paragraph 5(i)






SECTION 1 PURPOSE

This revenue procedure contains an annotated sample declaration of trust and alternate provisions that meet the requirements ofsect 664(d)(2) and (d)(3) of the Internal Revenue Code for an inter vivos charitable remainder unitrust (CRUT) providing for unitrustpayments payable consecutively for two measuring lives followed by the distribution of trust assets to a charitable remainderman


Previously the Internal Revenue Service issued sample trust instruments for certain types of CRUTs The Service is updatingthe previously issued samples and issuing new samples for additional types of CRUTs annotations and alternate sample provisionsare included as further guidance In addition to the sample trust instrument included in this revenue procedure for an inter vivosCRUT providing for unitrust payments payable consecutively for two measuring lives samples are provided in other separate revenueprocedures for


(b) an inter vivos CRUT providing for unitrust payments for a term of years (see Rev Proc 2005ndash53)(c) an inter vivos CRUT providing for unitrust payments payable concurrently and consecutively for two measuring lives (see

Rev Proc 2005ndash55 superseding section 5 of Rev Proc 90ndash30 1990ndash1 CB 534 and section 6 of Rev Proc 90ndash31)(d) a testamentary CRUT providing for unitrust payments for one measuring life (see Rev Proc 2005ndash56 superseding section

6 of Rev Proc 90ndash30 and section 7 of Rev Proc 90ndash31)(e) a testamentary CRUT providing for unitrust payments for a term of years (see Rev Proc 2005ndash57)(f) a testamentary CRUT providing for unitrust payments payable consecutively for two measuring lives (see Rev Proc




Section 4 of this revenue procedure provides a sample declaration of trust for an inter vivos CRUT having consecutive unitrustinterests for two measuring lives that is created by an individual who is a citizen or resident of the United States Section 5 of thisrevenue procedure provides annotations to the provisions of the sample trust Section 6 of this revenue procedure provides samplesof certain alternate provisions concerning (01) the payment of part of the unitrust amount to an organization described in sect 170(c)(02) a qualified contingency (03) a retained right to revoke the interest of the successor recipient (04) the last unitrust payments tothe recipients (05) the restriction of the charitable remainderman to a public charity (06) a retained right to substitute the charitableremainderman (07) a power of appointment to designate the charitable remainderman (08) the net income method of calculating theunitrust amount (09) the net income with make-up method of calculating the unitrust amount and (10) a combination of methodsfor calculating the unitrust amount

For transfers to a qualifying CRUT as defined in sect 664(d)(2) and if applicable sect 664(d)(3) the remainder interest will be de-ductible by a citizen or resident of the United States under sectsect 170(f)(2)(A) 2055(e)(2)(A) and 2522(c)(2)(A) for income estate andgift tax purposes respectively if the other requirements of sectsect 170(f)(2)(A) 2055(e)(2)(A) and 2522(c)(2)(A) (that is the require-ments not relating to the provisions of the governing instrument) also are met The Service will recognize a trust as a qualified CRUTmeeting all of the requirements of sect 664(d)(2) and if applicable sect 664(d)(3) if the trust operates in a manner consistent with the termsof the trust instrument if the trust is a valid trust under applicable local law and if the trust instrument (i) is substantially similar tothe sample in section 4 of this revenue procedure or (ii) properly integrates one or more alternate provisions from section 6 of thisrevenue procedure into a document substantially similar to the sample in section 4 of this revenue procedure A trust that containssubstantive provisions in addition to those provided in section 4 of this revenue procedure (other than properly integrated alternateprovisions from section 6 of this revenue procedure or provisions necessary to establish a valid trust under applicable local law that arenot inconsistent with the applicable federal tax requirements) or that omits any of the provisions of section 4 of this revenue procedure(unless an alternate provision from section 6 of this revenue procedure is properly integrated) will not necessarily be disqualified butneither will that trust be assured of qualification under the provisions of this revenue procedure The Service generally will not issue aletter ruling on whether an inter vivos trust created by an individual and having consecutive unitrust interests for two measuring livesqualifies as a CRUT The Service however generally will issue letter rulings on the effect of substantive trust provisions other thanthose contained in sections 4 and 6 of this revenue procedure on the qualification of a trust as a CRUT


SECTION 4 SAMPLE INTER VIVOS CHARITABLE REMAINDER UNITRUST mdash TWO LIVESCONSECUTIVE INTERESTS



2 Payment of Unitrust Amount In each taxable year of the trust during the unitrust period the Trustee shall pay to [permissiblerecipient] (hereinafter ldquothe Initial Recipientrdquo) until the Initial Recipientrsquos death and thereafter to [permissible recipient] (hereinafterldquothe Successor Recipientrdquo) a unitrust amount equal to [a number no less than 5 and no more than 50] percent of the net fair marketvalue of the assets of the trust valued as of the first day of each taxable year of the trust (hereinafter ldquothe valuation daterdquo) The first dayof the unitrust period shall be the date property is first transferred to the trust and the last day of the unitrust period shall be the dateof the death of the survivor of the Initial Recipient and the Successor Recipient The unitrust amount shall be paid in equal quarterlyinstallments at the end of each calendar quarter from income and to the extent income is not sufficient from principal Any incomeof the trust for a taxable year in excess of the unitrust amount shall be added to principal If for any year the net fair market valueof the trust assets is incorrectly determined then within a reasonable period after the correct value is finally determined the Trusteeshall pay to the Initial Recipient andor the Successor Recipient (in the case of an undervaluation) or receive from the Initial Recipientandor the Successor Recipient (in the case of an overvaluation) an amount equal to the difference between the unitrust amount(s)properly payable and the unitrust amount(s) actually paid

3 Payment of Federal Estate Taxes and State Death Taxes The lifetime unitrust interest of the Successor Recipient will take effectupon the death of the Initial Recipient only if the Successor Recipient furnishes the funds for payment of any federal estate taxes andstate death taxes for which the Trustee may be liable upon the death of the Initial Recipient If the funds are not furnished by theSuccessor Recipient the unitrust period shall terminate on the death of the Initial Recipient notwithstanding any other provision inthis instrument to the contrary

4 Proration of Unitrust Amount For a short taxable year and for the taxable year during which the unitrust period ends the Trusteeshall prorate on a daily basis the unitrust amount described in paragraph 2 or if an additional contribution is made to the trust theunitrust amount described in paragraph 6 If the Successor Recipient survives the Initial Recipient the Trustee shall prorate on a dailybasis the next regular unitrust payment due after the death of the Initial Recipient between the estate of the Initial Recipient and theSuccessor Recipient

5 Distribution to Charity At the termination of the unitrust period the Trustee shall distribute all of the then principal and incomeof the trust (other than any amount due the Initial Recipient andor the Successor Recipient under the terms of this trust) to [desig-nated remainderman] (hereinafter ldquothe Charitable Organizationrdquo) If the Charitable Organization is not an organization described insectsect 170(c) 2055(a) and 2522(a) of the Code at the time when any principal or income of the trust is to be distributed to it then theTrustee shall distribute the then principal and income to one or more organizations described in sectsect 170(c) 2055(a) and 2522(a) ofthe Code as the Trustee shall select and in the proportions as the Trustee shall decide in the Trusteersquos sole discretion


7 Deferral of the Unitrust Payment Allocable to Testamentary Transfer All property passing to the trust by reason of the deathof the Donor (hereinafter ldquothe testamentary transferrdquo) shall be considered to be a single contribution that is made on the date of theDonorrsquos death Notwithstanding the provisions of paragraphs 2 and 6 above the obligation to pay the unitrust amount with respectto the testamentary transfer shall commence with the date of the Donorrsquos death Nevertheless payment of the unitrust amount withrespect to the testamentary transfer may be deferred from the date of the Donorrsquos death until the end of the taxable year in which thefunding of the testamentary transfer is completed Within a reasonable time after the end of the taxable year in which the testamentarytransfer is completed the Trustee must pay to the Initial Recipient andor the Successor Recipient (in the case of an underpayment) orreceive from the Initial Recipient andor the Successor Recipient (in the case of an overpayment) the difference between any unitrustamounts allocable to the testamentary transfer that were actually paid plus interest and the unitrust amounts allocable to the testa-


mentary transfer that were payable plus interest The interest shall be computed for any period at the rate of interest compoundedannually that the federal income tax regulations under sect 664 of the Code prescribe for this computation







14 Definition of Initial Recipient and Successor Recipient References to the Initial Recipient andor the Successor Recipientin this trust instrument shall be deemed to include the estate of the Initial Recipient andor the Successor Recipient with regard toall provisions in this trust instrument that describe amounts payable to andor due from the Initial Recipient andor the SuccessorRecipient The prior sentence shall not apply to the determination of the last day of the unitrust period

SECTION 5 ANNOTATIONS REGARDING SAMPLE INTER VIVOS CHARITABLE REMAINDERUNITRUST mdash TWO LIVES CONSECUTIVE INTERESTS









(1) Permissible recipients For a CRUT with a unitrust period based on the lives of two individuals the unitrust amount mustgenerally be paid to those individuals and both must be living at the time of the creation of the trust See Rev Rul 2002ndash202002ndash1 CB 794 for situations in which the unitrust amount may be paid to a trust for the benefit of an individual who isfinancially disabled An organization described in sect 170(c) may receive part but not all of the unitrust amount Section664(d)(2)(A) and sect 1664ndash3(a)(3)(i) See section 601 of this revenue procedure for an alternate provision that provides forpayment of part of the unitrust amount to an organization described in sect 170(c)



(4) Payment of unitrust amount in installments Paragraph 2 Payment of Unitrust Amount of the sample trust specifies thatthe unitrust amount is to be paid in equal quarterly installments at the end of each quarter However the trust instrumentmay specify that the unitrust amount is to be paid to a recipient annually or in equal or unequal installments throughoutthe year See sect 1664ndash3(a)(1)(i) The amount of the charitable deduction will be affected by the frequency of payment bywhether the installments are equal or unequal and by whether each installment is payable at the beginning or end of theperiod See sect 1664ndash3(c) and sect 1664ndash4





03 Annotation for Paragraph 3 Payment of Federal Estate Taxes and State Death Taxes of the SampleTrust

(1) Tax payment clause If it is possible that all or part of the fair market value of the trust assets will be includible for federalestate tax purposes in the gross estate of the donor the trust must contain a tax payment clause If federal estate taxes andstate death taxes are paid from other sources the tax payment clause will never become operative Nevertheless the taxpayment clause is necessary because it ensures that the trustee will never be required to pay federal estate taxes or statedeath taxes from the trust assets See sect 664(d)(2)(B) sect 1664ndash1(a)(6) Example 3 and Rev Rul 82ndash128 1982ndash2 CB 71




(2) Determining unitrust amount payable in year of each recipientrsquos death Paragraph 4 Proration of Unitrust Amount of thesample trust specifies that upon the death of the initial recipient the next regular unitrust payment due shall be proratedon a daily basis between the estate of the initial recipient and the successor recipient See section 604 of this revenueprocedure for an alternate provision that terminates the payment of the initial recipientrsquos share of the unitrust amount withthe last regular payment preceding his or her death andor terminates the payment of the unitrust amount with the last regularpayment preceding the termination of the unitrust period




(3) Designated remainderman Any named charitable remainderman must be an organization described in sect 170(c) at thetime of the transfer to the CRUT See sect 664(d)(2)(C) Any named charitable remainderman must also be an organizationdescribed in sect 2522(a) to qualify for the gift tax charitable deduction and an organization described in sect 2055(a) to qualifyfor the estate tax charitable deduction See Rev Rul 77ndash385 1977ndash2 CB 331 If it is determined that a deduction undersect 2055(a) will not be necessary in any event all references to sect 2055(a) in the trust instrument may be deleted The trustinstrument may restrict the charitable remainderman to an organization described in sectsect 170(c) 2055(a) and 2522(a) butgrant to a trustee or other person the power to designate the actual charitable remainderman The gift of the remainderinterest will be incomplete for gift tax purposes if for example (i) the donor retains the power to substitute the charitableremainderman or (ii) the trust instrument provides the trustee with the power to designate the charitable remaindermanand the donor is not prohibited from serving as trustee See sect 252511ndash2(c) Note however that an income tax charitablededuction is available even if the donor has the authority to substitute the charitable remainderman or the trustee has theauthority to designate the charitable remainderman Rev Rul 68ndash417 1968ndash2 CB 103 Rev Rul 79ndash368 1979ndash2 CB109 See section 606 of this revenue procedure for an alternate provision in which the donor retains the right to substitutethe charitable remainderman See section 607 of this revenue procedure for an alternate provision in which a recipient isgranted a power of appointment to designate the charitable remainderman






(2) Proration of additional contributions Paragraph 6 Additional Contributions of the sample trust provides a formula fordetermining the unitrust amount in each year that an additional contribution is made to the CRUT If an additional con-tribution is made in a short taxable year or in the taxable year during which the unitrust period ends the unitrust amountcomputed under paragraph 6 of the sample trust must be prorated pursuant to paragraph 4 Proration of Unitrust Amountof the sample trust







(2) Testamentary additions If the donor makes an additional contribution at his or her death whereby the obligation to paythe unitrust amount with respect to any property passing to the trust by reason of the donorrsquos death begins as of the date ofthe donorrsquos death the requirement to pay the portion of the unitrust amount allocable to that contribution may be deferredpursuant to the provisions of sect 1664ndash1(a)(5)(i) The deferral provision in paragraph 7 of the sample trust uses the methodfor computing deferred payments that is provided in sect 1664ndash1(a)(5)(i) Note that sect 1664ndash1(a)(5)(ii) provides an alternatemethod for determining the amount described in sect 1664ndash1(a)(5)(i)(b) ie the unitrust amounts payable plus interest onthose amounts Rev Rul 92ndash57 1992ndash2 CB 123 provides sample language to be included in the governing instrumentif the alternate method set forth in sect 1664ndash1(a)(5)(ii) for determining the amount described in sect 1664ndash1(a)(5)(i)(b) isselected






(1) Payment of the unitrust amount Payment of the unitrust amount to the recipients is not considered an act of self-dealingwithin the meaning of sect 4941(d) as modified by sect 4947(a)(2)(A) or a taxable expenditure within the meaning of sect 4945(d)as modified by sect 4947(a)(2)(A) Section 534947ndash1(c)(2) of the Foundation and Similar Excise Taxes Regulations

(2) Prohibitions against certain investments and excess business holdings Prohibitions against investments that jeopardizethe exempt purpose of the trust within the meaning of sect 4944 as modified by sect 4947(a)(2)(A) and against retaining anyexcess business holdings within the meaning of sect 4943 as modified by sect 4947(a)(2)(A) are required if the trust providesfor payment of any part of a unitrust amount to an organization described in sect 170(c) and gift andor estate tax charitabledeductions are sought for the organizationrsquos interest in the unitrust amount See sect 4947(b)(3) See section 601 of this


revenue procedure for an alternate provision that provides for payment of part of the unitrust amount to an organizationdescribed in sect 170(c)


SECTION 6 ALTERNATE PROVISIONS FOR SAMPLE INTER VIVOS CHARITABLE REMAINDERUNITRUST mdash TWO LIVES CONSECUTIVE INTERESTS


(1) Explanation An organization described in sect 170(c) may receive part but not all of any unitrust amount Section664(d)(2)(A) If a gift tax charitable deduction and if needed an estate tax charitable deduction are sought for the presentvalue of the unitrust interest passing to a charitable organization the trust instrument must contain additional provisionsFirst the trust instrument must specify the portion of each unitrust payment that is payable to the noncharitable recipientsand to the charitable organization described in sectsect 170(c) 2522(a) and if needed sect 2055(a) Second the trust instrumentmust contain a means for selecting an alternative qualified charitable organization if the designated organization is not aqualified organization at the time when any unitrust amount is to be paid to it Third the trust instrument must containprohibitions against investments that jeopardize the exempt purpose of the trust within the meaning of sect 4944 as modifiedby sect 4947(a)(2)(A) and against retaining any excess business holdings within the meaning of sect 4943 as modified bysect 4947(a)(2)(A)


Payment of Unitrust Amount The unitrust amount is equal to [a number no less than 5 and no more than 50] percent ofthe net fair market value of the assets of the trust valued as of the first day of each taxable year of the trust (hereinafterthe ldquovaluation daterdquo) In each taxable year of the trust during the unitrust period the Trustee shall pay [the percentageof the unitrust amount payable to the noncharitable recipient] percent of the unitrust amount to [permissible recip-ient] (hereinafter ldquothe Initial Recipientrdquo) until the Initial Recipientrsquos death and thereafter to [permissible recipient](hereinafter ldquothe Successor Recipientrdquo) In each taxable year of the trust during the unitrust period the Trustee shallpay [the percentage of unitrust amount payable to the charitable recipient] percent of the unitrust amount to [an or-ganization described in sectsect 170(c) 2055(a) and 2522(a) of the Code] (hereinafter ldquothe Charitable Recipientrdquo) Thefirst day of the unitrust period shall be the date property is first transferred to the trust and the last day of the unitrustperiod shall be the date of the death of the survivor of the Initial Recipient and the Successor Recipient If the Chari-table Recipient is not an organization described in sectsect 170(c) 2055(a) and 2522(a) of the Code at the time when anyunitrust payment is to be distributed to it then the Trustee shall distribute that unitrust payment to one or more orga-nizations described in sectsect 170(c) 2055(a) and 2522(a) of the Code as the Trustee shall select and in the proportionsas the Trustee shall decide in the Trusteersquos sole discretion The unitrust amount shall be paid in equal quarterly in-stallments at the end of each calendar quarter from income and to the extent income is not sufficient from principalAny income of the trust for a taxable year in excess of the unitrust amount shall be added to principal If for anyyear the net fair market value of the trust assets is incorrectly determined then within a reasonable period after thecorrect value is finally determined the Trustee shall pay to the Initial Recipient andor the Successor Recipient andthe Charitable Recipient (in the case of an undervaluation) or receive from the Initial Recipient andor the SuccessorRecipient and the Charitable Recipient (in the case of an overvaluation) an amount equal to the difference betweenthe unitrust amount(s) properly payable and the unitrust amount(s) actually paid

(b) Replace the first parenthetical in paragraph 5 Distribution to Charity of the sample trust with the following parenthetical(other than any amount due the Initial Recipient andor the Successor Recipient and the Charitable Recipient underthe terms of this trust)

(c) Replace each reference to ldquothe Initial Recipient andor Successor Recipientrdquo in paragraph 7 Deferral of the UnitrustPayment Allocable to Testamentary Transfer of the sample trust with a reference to ldquothe Initial Recipient andor Suc-cessor Recipient and the Charitable Recipientrdquo




(1) Explanation Under sect 664(f) payment of the unitrust amount may terminate upon the earlier of the occurrence of a qualifiedcontingency (as defined in sect 664(f)(3)) or the death of the survivor of the initial recipient and the successor recipient Theamount of the charitable deduction however will be determined without regard to a qualified contingency See sect 664(f)(2)


The first day of the unitrust period shall be the date property is first transferred to the trust and the last day of the unitrustperiod shall be the date of the death of the survivor of the Initial Recipient and the Successor Recipient or if earlier thedate on which occurs the [qualified contingency]

03 Retaining the Right to Revoke the Interest of the Successor Recipient

(1) Explanation The donor may retain the right to revoke or terminate the interest of a noncharitable recipient This right isexercisable only by the donorrsquos last will and testament Section 1664ndash3(a)(4) The retention of this right may have gift andestate tax consequences It will affect the value of the unitrust interests transferred It may also cause a portion of the trustto be included in the donorrsquos gross estate for federal estate tax purposes even if it would otherwise not be includible Thefollowing alternate provision provides for the donorrsquos retention of the right to revoke the interest of the successor recipientwhen the donor is the initial recipient

(2) Instructions for use To retain the right to revoke the successor recipientrsquos interest by the donorrsquos last will and testament(a) Designate the donor as the initial recipient in paragraph 2 Payment of Unitrust Amount of the sample trust(b) Replace the second sentence of paragraph 2 Payment of Unitrust Amount of the sample trust with the following two

sentencesThe Donor hereby expressly reserves the power exercisable only by the Donorrsquos last will and testament to revokeand terminate the interest of the Successor Recipient under this trust The first day of the unitrust period shall be thedate property is first transferred to the trust and the last day of the unitrust period shall be the date of the death of thesurvivor of the Initial Recipient and the Successor Recipient or if the power to revoke the interest of the SuccessorRecipient is exercised by the Donor the date of the Initial Recipientrsquos death

04 Last Unitrust Payments to the Recipients

(1) Explanation As an alternative to prorating the unitrust amount in the taxable year of the initial recipientrsquos death the obli-gation to pay the unitrust amount to the initial recipient may terminate with the last regular payment preceding the initialrecipientrsquos death Similarly as an alternative to prorating the unitrust amount in the taxable year of the successor recipi-entrsquos death the obligation to pay the unitrust amount may terminate with the last regular payment preceding the successorrecipientrsquos death However the fact that a recipient may not receive a final prorated payment shall not be taken into accountfor purposes of determining the present value of the remainder interest Section 1664ndash3(a)(5)(i) Note that although theobligation to pay the unitrust amount to a recipient may terminate with the last regular payment preceding that recipientrsquosdeath the trustee must pay a recipientrsquos estate any amounts allocated to the payments payable before the recipientrsquos deaththat are due as a result of an adjustment to the unitrust amount payable for that year as in the case of an undervaluation oran additional contribution

(2) Instructions for use(a) To add an alternate provision to terminate the payment of the unitrust amount to the initial recipient with the last regular

payment preceding his or her death replace paragraph 4 Proration of Unitrust Amount of the sample trust with thefollowing paragraph

Proration of Unitrust Amount For a short taxable year and for the taxable year during which the unitrust periodends the Trustee shall prorate on a daily basis the unitrust amount described in paragraph 2 or if an additionalcontribution is made to the trust the unitrust amount described in paragraph 6 If the Successor Recipient survivesthe Initial Recipient the obligation of the Trustee to pay the unitrust amount to the Initial Recipient shall terminatewith the last regular quarterly installment preceding the death of the Initial Recipient and the entire amount of thefirst regular quarterly installment after the death of the Initial Recipient shall be paid to the Successor Recipient

(b) To add an alternate provision to terminate the payment of the unitrust amount with the last regular payment precedingthe termination of the unitrust period replace paragraph 4 Proration of Unitrust Amount of the sample trust with thefollowing paragraph


Proration of Unitrust Amount For a short taxable year the Trustee shall prorate on a daily basis the unitrust amountdescribed in paragraph 2 or if an additional contribution is made to the trust the unitrust amount described in para-graph 6 If the Successor Recipient survives the Initial Recipient the Trustee shall prorate on a daily basis the nextregular unitrust payment due after the death of the Initial Recipient between the estate of the Initial Recipient andthe Successor Recipient In the taxable year of the trust during which the unitrust period ends the obligation of theTrustee to pay the unitrust amount shall terminate with the last regular quarterly installment preceding the death ofthe survivor of the Initial Recipient and the Successor Recipient

(c) To add an alternate provision terminating the payment of the unitrust amount to the initial recipient with the last regularpayment preceding his or her death and terminating the payment of the unitrust amount with the last regular paymentpreceding the termination of the unitrust period replace paragraph 4 Proration of Annuity Amount of the sample trustwith the following paragraph

Proration of Unitrust Amount For a short taxable year the Trustee shall prorate on a daily basis the unitrust amountdescribed in paragraph 2 or if an additional contribution is made to the trust the unitrust amount described in para-graph 6 If the Successor Recipient survives the Initial Recipient the obligation of the Trustee to pay the unitrustamount to the Initial Recipient shall terminate with the last regular quarterly installment preceding the death of theInitial Recipient and the entire amount of the first regular quarterly installment after the death of the Initial Recipientshall be paid to the Successor Recipient In the taxable year of the trust during which the unitrust period ends theobligation of the Trustee to pay the unitrust amount shall terminate with the last regular quarterly installment preced-ing the death of the survivor of the Initial Recipient and the Successor Recipient










(2) Instructions for use Replace paragraph 5 Distribution to Charity of the sample trust with the following paragraphDistribution to Charity At the termination of the unitrust period the Trustee shall distribute all of the then principaland income of the trust (other than any amount due the Initial Recipient andor the Successor Recipient under the termsof this trust) to one or more charitable organizations described in sectsect 170(c) 2055(a) and 2522(a) of the Code as [oneof the named permissible recipients] shall appoint and direct by specific reference to this power of appointment by intervivos or testamentary instrument To the extent this power of appointment is not effectively exercised the principaland income not effectively appointed shall be distributed to one or more organizations described in sectsect 170(c) 2055(a)and 2522(a) of the Code as the Trustee shall select and in the proportions as the Trustee shall decide in the Trusteersquossole discretion If an organization fails to qualify as an organization described in sectsect 170(c) 2055(a) and 2522(a) of theCode at the time when any principal or income of the trust is to be distributed to it then the Trustee shall distribute the


then principal and income to one or more organizations described in sectsect 170(c) 2055(a) and 2522(a) of the Code as theTrustee shall select and in the proportions as the Trustee shall decide in the Trusteersquos sole discretion






In each taxable year of the trust during the unitrust period the Trustee shall pay to [permissible recipient] (hereinafterldquothe Initial Recipientrdquo) until the Initial Recipientrsquos death and thereafter to [permissible recipient] (hereinafter ldquotheSuccessor Recipientrdquo) a unitrust amount equal to the lesser of (a) a fixed percentage amount equal to [a numberno less than 5 and no more than 50] percent of the net fair market value of the assets of the trust valued as of thevaluation date (hereinafter ldquothe fixed percentage amount described in (a) of paragraph 2rdquo) or (b) the trust income forthe taxable year as defined in sect 643(b) of the Code and the applicable regulations The valuation date is the first dayof each taxable year of the trust The first day of the unitrust period shall be the date property is first transferred tothe trust and the last day of the unitrust period shall be the date of the death of the survivor of the Initial Recipient andthe Successor Recipient The unitrust amount shall be paid in equal quarterly installments at the end of each calendarquarter from income Any income of the trust for a taxable year in excess of the unitrust amount shall be added toprincipal

(c) Replace paragraph 4 Proration of Unitrust Amount of the sample trust with the following paragraphProration of Unitrust Amount For a short taxable year and for the taxable year during which the unitrust periodends the Trustee shall prorate on a daily basis the fixed percentage amount described in (a) of paragraph 2 or if anadditional contribution is made to the trust the fixed percentage amount described in (a) of paragraph 6 In such ayear this prorated fixed percentage amount shall be used in place of the fixed percentage amount described in (a) ofparagraph 2 or in (a) of paragraph 6 to determine the unitrust amount payable for that year If the Successor Recipientsurvives the Initial Recipient the Trustee shall prorate on a daily basis the next regular unitrust payment due after thedeath of the Initial Recipient between the estate of the Initial Recipient and the Successor Recipient

(d) Replace paragraph 6 Additional Contributions of the sample trust with the following paragraphAdditional Contributions Notwithstanding paragraph 2 if any additional contributions are made to the trust afterthe initial contribution the unitrust amount for the year in which any additional contribution is made shall be equalto the lesser of (a) a fixed percentage amount equal to [same percentage used in (a) of paragraph 2] percent of thesum of (1) the net fair market value of the trust assets as of the valuation date (excluding the assets so added andany post-contribution income from and appreciation on such assets during that year) and (2) for each additionalcontribution during the year the fair market value of the assets so added as of the valuation date (including anypost-contribution income from and appreciation on such assets through the valuation date) multiplied by a fractionthe numerator of which is the number of days in the period that begins with the date of contribution and ends withthe earlier of the last day of the taxable year or the last day of the unitrust period and the denominator of which is thenumber of days in the period that begins with the first day of such taxable year and ends with the earlier of the lastday in such taxable year or the last day of the unitrust period (hereinafter ldquothe fixed percentage amount described in


(a) of paragraph 6rdquo) or (b) the trust income for the taxable year as defined in sect 643(b) of the Code and the applicableregulations In a taxable year in which an additional contribution is made on or after the valuation date the assets soadded shall be valued as of the date of contribution without regard to any post-contribution income or appreciationrather than as of the valuation date


(1) Explanation As an alternative to using the fixed percentage method of calculating the unitrust amount in paragraph 2 ofthe sample trust a CRUT may use the net income with make-up method for calculating the unitrust amount Under thenet income with make-up method the unitrust amount consists of two components (i) the amount determined under thenet income method (as described in section 608 of this revenue procedure) and (ii) the amount of trust income that is inexcess of the fixed percentage amount for that year but only to the extent that the aggregate of the unitrust amounts paidto the recipients in prior years was less than the amounts that would have been paid to the recipients if the unitrust amounthad been computed using the fixed percentage method Section 664(d)(3)(B) and sect 1664ndash3(a)(1)(i)(b)(2) For purposesof determining the amount of the charitable contribution the remainder interest is computed on the basis that an amountequal to the fixed percentage unitrust amount is to be distributed each year without regard to the possibility that a smaller orlarger amount of trust income may be the amount distributed Section 664(e) See section 608(2) of this revenue procedurefor rules relating to the definition of trust income



In each taxable year of the trust during the unitrust period the Trustee shall pay to [permissible recipient] (hereinafterldquothe Initial Recipientrdquo) until the Initial Recipientrsquos death and thereafter to [permissible recipient] (hereinafter ldquotheSuccessor Recipientrdquo) a unitrust amount equal to the lesser of (a) a fixed percentage amount equal to [a number noless than 5 and no more than 50] percent of the net fair market value of the assets of the trust valued as of the valuationdate (hereinafter ldquothe fixed percentage amount described in (a) of paragraph 2rdquo) or (b) the trust income for the taxableyear as defined in sect 643(b) of the Code and the applicable regulations The unitrust amount for a taxable year shallalso include any amount of trust income for the year that is in excess of [the fixed percentage amount determinedunder (a) of this paragraph for the year] but only to the extent that the aggregate of the amounts paid in prior yearswhether to the Initial Recipient or to the Successor Recipient was less than the aggregate of the amounts determinedfor all prior years under (a) of this paragraph and (a) of paragraph 6 The valuation date is the first day of each taxableyear of the trust The first day of the unitrust period shall be the date property is first transferred to the trust and thelast day of the unitrust period shall be the date of the death of the survivor of the Initial Recipient and the SuccessorRecipient The unitrust amount shall be paid in equal quarterly installments at the end of each calendar quarter fromincome Any income of the trust for a taxable year in excess of the unitrust amount shall be added to principal


(d) Replace paragraph 6 Additional Contributions of the sample trust with the following paragraphAdditional Contributions Notwithstanding paragraph 2 if any additional contributions are made to the trust afterthe initial contribution the unitrust amount for the year in which any additional contribution is made shall be equalto the lesser of (a) a fixed percentage amount equal to [same percentage used in (a) of paragraph 2] percent of thesum of (1) the net fair market value of the trust assets as of the valuation date (excluding the assets so added andany post-contribution income from and appreciation on such assets during that year) and (2) for each additionalcontribution during the year the fair market value of the assets so added as of the valuation date (including anypost-contribution income from and appreciation on such assets through the valuation date) multiplied by a fractionthe numerator of which is the number of days in the period that begins with the date of contribution and ends withthe earlier of the last day of the taxable year or the last day of the unitrust period and the denominator of which is thenumber of days in the period that begins with the first day of such taxable year and ends with the earlier of the lastday in such taxable year or the last day of the unitrust period (hereinafter ldquothe fixed percentage amount described in(a) of paragraph 6rdquo) or (b) the trust income for the taxable year as defined in sect 643(b) of the Code and the applicableregulations The unitrust amount for that year shall also include any amount of trust income for the year that is in


excess of [the fixed percentage amount determined under (a) of this paragraph for the year] but only to the extentthat the aggregate of the amounts paid in prior years whether to the Initial Recipient or to the Successor Recipientwas less than the aggregate of the amounts determined for all prior years under (a) of paragraph 2 and (a) of thisparagraph In a taxable year in which an additional contribution is made on or after the valuation date the assets soadded shall be valued as of the date of contribution without regard to any post-contribution income or appreciationrather than as of the valuation date


(1) Explanation The net income method (described in section 608 of this revenue procedure) or the net income with make-upmethod (described in section 609 of this revenue procedure) may be combined with the fixed percentage method for cal-culating the unitrust amount Section 1664ndash3(a)(1)(i)(c) More specifically the governing instrument may provide forpayment of the unitrust amount not less often than annually using the net income or the net income with make-up method ofcalculation and then in the years following a permissible triggering event (as described in sect 1664ndash3(a)(1)(i)(c) and (d))for payment of the unitrust amount using the fixed percentage method of calculation To provide for a one-time conversionfrom the net income or the net income with make-up method to the fixed percentage method of calculation the governinginstrument must provide that (i) the change in method is triggered on a specific date or by a single event whose occurrenceis not discretionary with or within the control of the trustees or any other persons (ii) the change in method occurs atthe beginning of the taxable year that immediately follows the taxable year during which the permissible triggering eventoccurs and (iii) following the trustrsquos conversion to the fixed percentage method the trust will pay at least annually to theinitial recipient andor the successor recipient the amount described in sect 1664ndash3(a)(1)(i)(a) and no amount described insect 1664ndash3(a)(1)(i)(b) Section 1664ndash3(a)(1)(i)(c) Thus any make-up amount described in sect 1664ndash3(a)(1)(i)(b)(2) that isnot paid by the beginning of the taxable year immediately following the taxable year during which the permissible trigger-ing event occurs shall be forfeited by the initial recipient andor successor recipient and added to principal




(i) Unitrust amount determined by net income method In each taxable year of the trust during the unitrust period theTrustee shall pay to [permissible recipient] (hereinafter ldquothe Initial Recipientrdquo) until the Initial Recipientrsquos deathand thereafter to [permissible recipient] (hereinafter ldquothe Successor Recipientrdquo) a unitrust amount equal to thelesser of (a) a fixed percentage amount equal to [a number no less than 5 and no more than 50] percent of the netfair market value of the assets of the trust valued as of the valuation date (hereinafter ldquothe fixed percentage amountdescribed in (a) of paragraph 2(i)rdquo) or (b) the trust income for the taxable year as defined in sect 643(b) of the Codeand the applicable regulations The unitrust amount shall be paid in equal quarterly installments at the end of eachcalendar quarter from income Any income of the trust for a taxable year in excess of the unitrust amount shall beadded to principal

(ii) Conversion to fixed percentage method of determining unitrust amount Notwithstanding paragraph 2(i) upon theoccurrence of [permissible triggering event as described in sect 1664ndash3(a)(1)(i)(c) and (d) of the Income Tax Reg-ulations] (hereinafter ldquothe triggering eventrdquo) and effective as of the first day of the taxable year that immediatelyfollows the triggering event (hereinafter ldquothe effective date of the triggering eventrdquo) in each remaining taxableyear of the trust during the unitrust period the Trustee shall pay to the Initial Recipient until his or her death andthereafter to the Successor Recipient a unitrust amount equal to [same percentage used in (a) of paragraph 2(i)]percent of the net fair market value of the trust assets as of the valuation date Beginning on the effective date ofthe triggering event the Trustee shall no longer pay the amount equal to the lesser of (a) or (b) in paragraph 2(i)The unitrust amount shall be paid in equal quarterly installments at the end of each calendar quarter from incomeand to the extent income is not sufficient from principal Any income of the trust for a taxable year in excess ofthe unitrust amount shall be added to principal

(iii) In general The first day of the unitrust period shall be the date property is first transferred to the trust and the lastday of the unitrust period shall be the date of the death of the survivor of the Initial Recipient and the SuccessorRecipient The valuation date is the first day of each taxable year of the trust If for any year the net fair marketvalue of the trust assets is incorrectly determined then within a reasonable period after the correct value is finallydetermined the Trustee shall pay to the Initial Recipient andor the Successor Recipient (in the case of an under-valuation) or receive from the Initial Recipient andor the Successor Recipient (in the case of an overvaluation) anamount equal to the difference between the unitrust amount(s) properly payable and the unitrust amount(s) actuallypaid



(i) Proration in years preceding the effective date of triggering event For a short taxable year before the effectivedate of the triggering event which may include the taxable year during which the unitrust period ends the Trusteeshall prorate on a daily basis the fixed percentage amount described in (a) of paragraph 2(i) or if an additionalcontribution is made to the trust the fixed percentage amount described in (a) of paragraph 6(i) In such a shorttaxable year this prorated fixed percentage amount shall be used in place of the fixed percentage amount describedin (a) of paragraph 2(i) or in (a) of paragraph 6(i) to determine the unitrust amount payable for that year


(iii) Proration of unitrust amount between Initial Recipient and Successor Recipient If the Successor Recipient sur-vives the Initial Recipient the Trustee shall prorate on a daily basis the next regular unitrust payment due after thedeath of the Initial Recipient between the estate of the Initial Recipient and the Successor Recipient














(b) Replace paragraph 2 Payment of Unitrust Amount of the sample trust with the following paragraph


Payment of Unitrust Amount(i) Unitrust amount determined by net income with make-up method In each taxable year of the trust during the

unitrust period the Trustee shall pay to [permissible recipient] (hereinafter ldquothe Initial Recipientrdquo) until the Ini-tial Recipientrsquos death and thereafter to [permissible recipient] (hereinafter ldquothe Successor Recipientrdquo) a unitrustamount equal to the lesser of (a) a fixed percentage amount equal to [a number no less than 5 and no more than50] percent of the net fair market value of the assets of the trust valued as of the valuation date (hereinafter ldquothefixed percentage amount described in (a) of paragraph 2(i)rdquo) or (b) the trust income for the taxable year as definedin sect 643(b) of the Code and the applicable regulations The unitrust amount for a taxable year shall also includeany amount of trust income for the year that is in excess of [the fixed percentage amount determined under (a) ofparagraph 2(i) for the year] but only to the extent that the aggregate of the amounts paid in prior years whetherto the Initial Recipient or to the Successor Recipient was less than the aggregate of the amounts determined forall prior years under (a) of paragraph 2(i) and (a) of paragraph 6(i) The unitrust amount shall be paid in equalquarterly installments at the end of each calendar quarter from income Any income of the trust for a taxable yearin excess of the unitrust amount shall be added to principal

(ii) Conversion to fixed percentage method of determining unitrust amount Notwithstanding paragraph 2(i) upon theoccurrence of [permissible triggering event as described in sect 1664ndash3(a)(1)(i)(c) and (d) of the Income Tax Reg-ulations] (hereinafter ldquothe triggering eventrdquo) and effective as of the first day of the taxable year that immediatelyfollows the triggering event (hereinafter ldquothe effective date of the triggering eventrdquo) in each remaining taxableyear of the trust during the unitrust period the Trustee shall pay to the Initial Recipient until his or her death andthereafter to the Successor Recipient a unitrust amount equal to [same percentage used in (a) of paragraph 2(i)]percent of the net fair market value of the trust assets as of the valuation date Beginning on the effective date ofthe triggering event the Trustee shall no longer pay the amount equal to the lesser of (a) or (b) in paragraph 2(i)and shall not pay any amount of trust income described in the second sentence of paragraph 2(i) The unitrustamount shall be paid in equal quarterly installments at the end of each calendar quarter from income and to theextent income is not sufficient from principal Any income of the trust for a taxable year in excess of the unitrustamount shall be added to principal









post-contribution income from and appreciation on such assets during that year) and




The unitrust amount for that year shall also include any amount of trust income for the year that is in excess of[the fixed percentage amount determined under (a) of paragraph 6(i) for the year] but only to the extent that theaggregate of the amounts paid in prior years whether to the Initial Recipient or to the Successor Recipient wasless than the aggregate of the amounts determined for all prior years under (a) of paragraph 2(i) and under (a) ofparagraph 6(i) In a taxable year in which an additional contribution is made on or after the valuation date theassets so added shall be valued as of the date of contribution without regard to any post-contribution income orappreciation rather than as of the valuation date






Section 4 of Rev Proc 90ndash30 and section 5 of Rev Proc 90ndash31 are superseded





SECTION 1 PURPOSE

This revenue procedure contains an annotated sample declaration of trust and alternate provisions that meet the requirements ofsect 664(d)(2) and (d)(3) of the Internal Revenue Code for an inter vivos charitable remainder unitrust (CRUT) providing for unitrustpayments payable concurrently and consecutively for two measuring lives followed by the distribution of trust assets to a charitableremainderman



Previously the Internal Revenue Service issued sample trust instruments for certain types of CRUTs The Service is updatingthe previously issued samples and issuing new samples for additional types of CRUTs annotations and alternate sample provisionsare included as further guidance In addition to the sample trust instrument included in this revenue procedure for an inter vivosCRUT providing for unitrust payments payable concurrently and consecutively for two measuring lives samples are provided inother separate revenue procedures for


(b) an inter vivos CRUT providing for unitrust payments for a term of years (see Rev Proc 2005ndash53)(c) an inter vivos CRUT providing for unitrust payments payable consecutively for two measuring lives (see Rev Proc

2005ndash54 superseding section 4 of Rev Proc 90ndash30 1990ndash1 CB 534 and section 5 of Rev Proc 90ndash31)(d) a testamentary CRUT providing for unitrust payments for one measuring life (see Rev Proc 2005ndash56 superseding section





Section 4 of this revenue procedure provides a sample declaration of trust for an inter vivos CRUT having concurrent and consecu-tive unitrust interests for two measuring lives that is created by an individual who is a citizen or resident of the United States Section5 of this revenue procedure provides annotations to the provisions of the sample trust Section 6 of this revenue procedure providessamples of certain alternate provisions concerning (01) the payment of part of the unitrust amount to an organization described insect 170(c) (02) a qualified contingency (03) a retained right to revoke the interest of the survivor recipient (04) the last unitrustpayments to the recipients (05) the restriction of the charitable remainderman to a public charity (06) a retained right to substitutethe charitable remainderman (07) a power of appointment to designate the charitable remainderman (08) the net income method ofcalculating the unitrust amount (09) the net income with make-up method of calculating the unitrust amount and (10) a combinationof methods for calculating the unitrust amount

For transfers to a qualifying CRUT as defined in sect 664(d)(2) and if applicable sect 664(d)(3) the remainder interest will be de-ductible by a citizen or resident of the United States under sect 170(f)(2)(A) 2055(e)(2)(A) and 2522(c)(2)(A) for income estate andgift tax purposes respectively if the other requirements of sectsect 170(f)(2)(A) 2055(e)(2)(A) and 2522(c)(2)(A) (that is the require-ments not relating to the provisions of the governing instrument) also are met The Service will recognize a trust as a qualified CRUTmeeting all of the requirements of sect 664(d)(2) and if applicable sect 664(d)(3) if the trust operates in a manner consistent with the termsof the trust instrument if the trust is a valid trust under applicable local law and if the trust instrument (i) is substantially similar tothe sample in section 4 of this revenue procedure or (ii) properly integrates one or more alternate provisions from section 6 of thisrevenue procedure into a document substantially similar to the sample in section 4 of this revenue procedure A trust that containssubstantive provisions in addition to those provided in section 4 of this revenue procedure (other than properly integrated alternateprovisions from section 6 of this revenue procedure or provisions necessary to establish a valid trust under applicable local law that arenot inconsistent with the applicable federal tax requirements) or that omits any of the provisions of section 4 of this revenue procedure(unless an alternate provision from section 6 of this revenue procedure is properly integrated) will not necessarily be disqualifiedbut neither will that trust be assured of qualification under the provisions of this revenue procedure The Service generally will notissue a letter ruling on whether an inter vivos trust created by an individual and having concurrent and consecutive unitrust interestsfor two measuring lives qualifies as a CRUT The Service however generally will issue letter rulings on the effect of substantive trustprovisions other than those contained in sections 4 and 6 of this revenue procedure on the qualification of a trust as a CRUT

SECTION 4 SAMPLE INTER VIVOS CHARITABLE REMAINDER UNITRUST mdash TWO LIVESCONCURRENT AND CONSECUTIVE INTERESTS




2 Payment of Unitrust Amount In each taxable year of the trust during the unitrust period the Trustee shall pay to [permissiblerecipient] and to [permissible recipient] (hereinafter ldquothe Recipientsrdquo) in equal shares during their joint lives a unitrust amount equalto [a number no less than 5 and no more than 50] percent of the net fair market value of the assets of the trust valued as of thefirst day of each taxable year of the trust (hereinafter ldquothe valuation daterdquo) and upon the death of one (hereinafter ldquothe PredeceasingRecipientrdquo) the Trustee shall pay the entire unitrust amount to the survivor (hereinafter ldquothe Survivor Recipientrdquo) The first day ofthe unitrust period shall be the date property is first transferred to the trust and the last day of the unitrust period shall be the date ofthe Survivor Recipientrsquos death The unitrust amount shall be paid in equal quarterly installments at the end of each calendar quarterfrom income and to the extent income is not sufficient from principal Any income of the trust for a taxable year in excess of theunitrust amount shall be added to principal If for any year the net fair market value of the trust assets is incorrectly determined thenwithin a reasonable period after the correct value is finally determined the Trustee shall pay to the Predeceasing Recipient andorthe Survivor Recipient (in the case of an undervaluation) or receive from the Predeceasing Recipient andor the Survivor Recipient(in the case of an overvaluation) an amount equal to the difference between the unitrust amount(s) properly payable and the unitrustamount(s) actually paid

3 Payment of Federal Estate Taxes and State Death Taxes The lifetime unitrust interest of the Survivor Recipient will take effectupon the death of the Predeceasing Recipient only if the Survivor Recipient furnishes the funds for payment of any federal estate taxesand state death taxes for which the Trustee may be liable upon the death of the Predeceasing Recipient If the funds are not furnishedby the Survivor Recipient the unitrust period shall terminate on the death of the Predeceasing Recipient notwithstanding any otherprovision in this instrument to the contrary

4 Proration of Unitrust Amount For a short taxable year and for the taxable year during which the unitrust period ends the Trusteeshall prorate on a daily basis the unitrust amount described in paragraph 2 or if an additional contribution is made to the trust theunitrust amount described in paragraph 6 Upon the death of the Predeceasing Recipient the Trustee shall prorate on a daily basis thenext regular unitrust payment due after the death of the Predeceasing Recipient between the estate of the Predeceasing Recipient andthe Survivor Recipient

5 Distribution to Charity At the termination of the unitrust period the Trustee shall distribute all of the then principal and incomeof the trust (other than any amount due the Predeceasing Recipient andor the Survivor Recipient under the terms of this trust) to [des-ignated remainderman] (hereinafter ldquothe Charitable Organizationrdquo) If the Charitable Organization is not an organization describedin sectsect 170(c) 2055(a) and 2522(a) of the Code at the time when any principal or income of the trust is to be distributed to it then theTrustee shall distribute the then principal and income to one or more organizations described in sectsect 170(c) 2055(a) and 2522(a) ofthe Code as the Trustee shall select and in the proportions as the Trustee shall decide in the Trusteersquos sole discretion


7 Deferral of the Unitrust Payment Allocable to Testamentary Transfer All property passing to the trust by reason of the deathof the Donor (hereinafter ldquothe testamentary transferrdquo) shall be considered to be a single contribution that is made on the date of theDonorrsquos death Notwithstanding the provisions of paragraphs 2 and 6 above the obligation to pay the unitrust amount with respectto the testamentary transfer shall commence with the date of the Donorrsquos death Nevertheless payment of the unitrust amount withrespect to the testamentary transfer may be deferred from the date of the Donorrsquos death until the end of the taxable year in which thefunding of the testamentary transfer is completed Within a reasonable time after the end of the taxable year in which the testamentarytransfer is completed the Trustee must pay to the Predeceasing Recipient andor the Survivor Recipient (in the case of an under-payment) or receive from the Predeceasing Recipient andor the Survivor Recipient (in the case of an overpayment) the differencebetween any unitrust amounts allocable to the testamentary transfer that were actually paid plus interest and the unitrust amountsallocable to the testamentary transfer that were payable plus interest The interest shall be computed for any period at the rate ofinterest compounded annually that the federal income tax regulations under sect 664 of the Code prescribe for this computation








14 Definition of Predeceasing Recipient and Survivor Recipient References to the Predeceasing Recipient andor the SurvivorRecipient in this trust instrument shall be deemed to include the estate of the Predeceasing Recipient andor the Survivor Recipientwith regard to all provisions in this trust instrument that describe amounts payable to andor due from the Predeceasing Recipientandor the Survivor Recipient The prior sentence shall not apply to the determination of the last day of the unitrust period

SECTION 5 ANNOTATIONS REGARDING SAMPLE INTER VIVOS CHARITABLE REMAINDERUNITRUST mdash TWO LIVES CONCURRENT AND CONSECUTIVE INTERESTS











(3) Division of unitrust amount between recipients The sample trust provides that while both recipients are alive they willshare the unitrust amount equally and upon the death of the predeceasing recipient the survivor recipient will receive allof the unitrust amount subject to any proration in paragraph 4 However the unitrust amount may be divided other thanequally during the joint lives of the recipients In addition the share of the predeceasing recipient may be made payable toan organization described in sect 170(c) for the rest of the survivor recipientrsquos life


(5) Payment of unitrust amount in installments Paragraph 2 Payment of Unitrust Amount of the sample trust specifies thatthe unitrust amount is to be paid in equal quarterly installments at the end of each quarter However the trust instrumentmay specify that the unitrust amount is to be paid to the recipients annually or in equal or unequal installments throughoutthe year See sect 1664ndash3(a)(1)(i) The amount of the charitable deduction will be affected by the frequency of payment bywhether the installments are equal or unequal and by whether each installment is payable at the beginning or end of theperiod See sect 1664ndash3(c) and sect 1664ndash4










(2) Determining unitrust amount payable in year of each recipientrsquos death Paragraph 4 Proration of Unitrust Amount ofthe sample trust specifies that upon the death of the predeceasing recipient the next regular unitrust payment due shallbe prorated on a daily basis between the estate of the predeceasing recipient and the survivor recipient See section 604of this revenue procedure for an alternate provision that terminates the payment of the predeceasing recipientrsquos share ofthe unitrust amount with the last regular payment preceding his or her death andor terminates the payment of the unitrustamount with the last regular payment preceding the termination of the unitrust period
























(2) Prohibitions against certain investments and excess business holdings Prohibitions against investments that jeopardizethe exempt purpose of the trust within the meaning of sect 4944 as modified by sect 4947(a)(2)(A) and against retaining anyexcess business holdings within the meaning of sect 4943 as modified by sect 4947(a)(2)(A) are required if the trust providesfor payment of any part of a unitrust amount to an organization described in sect 170(c) and gift and estate tax charitabledeductions are sought for the organizationrsquos interest in the unitrust amount See sect 4947(b)(3) See section 601 of this




SECTION 6 ALTERNATE PROVISIONS FOR SAMPLE INTER VIVOS CHARITABLE REMAINDERUNITRUST mdash TWO LIVES CONCURRENT AND CONSECUTIVE INTERESTS




Payment of Unitrust Amount The unitrust amount is equal to [a number no less than 5 and no more than 50] percent ofthe net fair market value of the assets of the trust valued as of the first day of each taxable year of the trust (hereinafterldquothe valuation daterdquo) In each taxable year of the trust during the unitrust period the Trustee shall pay [the percentageof the unitrust amount payable to the noncharitable recipient] percent of the unitrust amount to [permissible recipient]and [permissible recipient] (hereinafter ldquothe Recipientsrdquo) in equal shares during their joint lives and upon the deathof one (hereinafter ldquothe Predeceasing Recipientrdquo) the Trustee shall pay that entire percentage of the unitrust amountto the survivor (hereinafter ldquothe Survivor Recipientrdquo) In each taxable year of the trust during the unitrust periodthe Trustee shall pay [the percentage of unitrust amount payable to the charitable recipient] percent of the unitrustamount to [an organization described in sectsect 170(c) 2055(a) and 2522(a) of the Code] (hereinafter ldquothe CharitableRecipientrdquo) The first day of the unitrust period shall be the date property is first transferred to the trust and the lastday of the unitrust period shall be the date of the Survivor Recipientrsquos death If the Charitable Recipient is not anorganization described in sectsect 170(c) 2055(a) and 2522(a) of the Code at the time when any unitrust payment is tobe distributed to it then the Trustee shall distribute that unitrust payment to one or more organizations described insectsect 170(c) 2055(a) and 2522(a) of the Code as the Trustee shall select and in the proportions as the Trustee shalldecide in the Trusteersquos sole discretion The unitrust amount shall be paid in equal quarterly installments at the endof each calendar quarter from income and to the extent income is not sufficient from principal Any income of thetrust for a taxable year in excess of the unitrust amount shall be added to principal If for any year the net fair marketvalue of the trust assets is incorrectly determined then within a reasonable period after the correct value is finallydetermined the Trustee shall pay to the Predeceasing Recipient andor the Survivor Recipient and the CharitableRecipient (in the case of an undervaluation) or receive from the Predeceasing Recipient andor the Survivor Recipientand the Charitable Recipient (in the case of an overvaluation) an amount equal to the difference between the unitrustamount(s) properly payable and the unitrust amount(s) actually paid

(b) Replace the first parenthetical in paragraph 5 Distribution to Charity of the sample trust with the following parenthetical(other than any amount due the Predeceasing Recipient andor the Survivor Recipient and the Charitable Recipientunder the terms of this trust)


(c) Replace each reference to ldquothe Predeceasing Recipient andor Survivor Recipientrdquo in paragraph 7 Deferral of the Uni-trust Payment Allocable to Testamentary Transfer of the sample trust with a reference to ldquothe Predeceasing Recipientandor Survivor Recipient and the Charitable Recipientrdquo



(1) Explanation Under sect 664(f) payment of the unitrust amount may terminate upon the earlier of the occurrence of a qualifiedcontingency (as defined in sect 664(f)(3)) or the death of the survivor recipient The amount of the charitable deductionhowever will be determined without regard to a qualified contingency See sect 664(f)(2)


The first day of the unitrust period shall be the date property is first transferred to the trust and the last day of the unitrustperiod shall be the date of the Survivor Recipientrsquos death or if earlier the date on which occurs the [qualified contin-gency]

03 Retaining the Right to Revoke the Interest of the Survivor Recipient

(1) Explanation The donor may retain the right to revoke or terminate the interest of a noncharitable recipient This right isexercisable only by the donorrsquos last will and testament Section 1664ndash3(a)(4) The retention of this right may have gift andestate tax consequences It will affect the value of the unitrust interests transferred It may also cause a portion of the trustto be included in the donorrsquos gross estate for federal estate tax purposes even if it would otherwise not be includible Thefollowing alternate provision provides for the donorrsquos retention of the right to revoke the interest of the survivor recipientwhen the donor is also a recipient

(2) Instructions for use To retain the right to revoke the interest of the survivor recipient by the donorrsquos last will and testament(a) Designate the donor as a recipient in paragraph 2 Payment of Unitrust Amount of the sample trust(b) Replace the second sentence of paragraph 2 Payment of Unitrust Amount of the sample trust with the following two

sentencesThe Donor hereby expressly reserves the power exercisable only by the Donorrsquos last will and testament to revokeand terminate the interest of [the name of permissible recipient who is not the Donor] under this trust The first dayof the unitrust period shall be the date property is first transferred to the trust and the last day of the unitrust periodshall be the date of the Survivor Recipientrsquos death or if the power to revoke the interest of [the name of permissiblerecipient who is not the Donor] is exercised the earlier date of the Donorrsquos death


(1) Explanation As an alternative to prorating the unitrust amount in the taxable year of the predeceasing recipientrsquos deaththe obligation to pay the predeceasing recipientrsquos share of the unitrust amount may terminate with the last regular paymentpreceding the predeceasing recipientrsquos death Similarly as an alternative to prorating the unitrust amount in the taxableyear of the survivor recipientrsquos death the obligation to pay the unitrust amount may terminate with the last regular paymentpreceding the survivor recipientrsquos death However the fact that a recipient may not receive a final prorated payment shallnot be taken into account for purposes of determining the present value of the remainder interest Section 1664ndash3(a)(5)(i)Note that although the obligation to pay the unitrust amount or in the case of the predeceasing recipient a share of theunitrust amount to a recipient may terminate with the last regular payment preceding that recipientrsquos death the trusteemust pay a recipientrsquos estate any amounts allocated to the payments payable before the recipientrsquos death that are due as aresult of an adjustment to the unitrust amount payable for that year as in the case of an undervaluation or an additionalcontribution

(2) Instructions for use(a) To add an alternate provision to terminate the payment of the predeceasing recipientrsquos share of the unitrust amount with

the last regular payment preceding his or her death replace paragraph 4 Proration of Unitrust Amount of the sampletrust with the following paragraph

Proration of Unitrust Amount For a short taxable year and for the taxable year during which the unitrust period endsthe Trustee shall prorate on a daily basis the unitrust amount described in paragraph 2 or if an additional contributionis made to the trust the unitrust amount described in paragraph 6 Upon the death of the Predeceasing Recipient theobligation of the Trustee to pay a share of the unitrust amount to the Predeceasing Recipient shall terminate with the


last regular quarterly installment preceding the death of the Predeceasing Recipient and the Predeceasing Recipientrsquosshare of the unitrust amount shall thereafter be added to and paid as part of the share of the Survivor Recipient


Proration of Unitrust Amount For a short taxable year the Trustee shall prorate on a daily basis the unitrust amountdescribed in paragraph 2 or if an additional contribution is made to the trust the unitrust amount described in para-graph 6 Upon the death of the Predeceasing Recipient the Trustee shall prorate on a daily basis the next regularunitrust payment due after the death of the Predeceasing Recipient between the estate of the Predeceasing Recipientand the Survivor Recipient In the taxable year of the trust during which the unitrust period ends the obligation ofthe Trustee to pay the unitrust amount shall terminate with the last regular quarterly installment preceding the deathof the Survivor Recipient

(c) To add an alternate provision terminating the payment of the predeceasing recipientrsquos share of the unitrust amount withthe last regular payment preceding his or her death and terminating the payment of the unitrust amount with the lastregular payment preceding the termination of the unitrust period replace paragraph 4 Proration of Annuity Amount ofthe sample trust with the following paragraph

Proration of Unitrust Amount For a short taxable year the Trustee shall prorate on a daily basis the unitrust amountdescribed in paragraph 2 or if an additional contribution is made to the trust the unitrust amount described in para-graph 6 Upon the death of the Predeceasing Recipient the obligation of the Trustee to pay a share of the unitrustamount to the Predeceasing Recipient shall terminate with the last regular quarterly installment preceding the deathof the Predeceasing Recipient and the Predeceasing Recipientrsquos share of the unitrust amount shall thereafter be addedto and paid as part of the share of the Survivor Recipient In the taxable year of the trust during which the unitrustperiod ends the obligation of the Trustee to pay the unitrust amount shall terminate with the last regular quarterlyinstallment preceding the death of the Survivor Recipient










(2) Instructions for use Replace paragraph 5 Distribution to Charity of the sample trust with the following paragraphDistribution to Charity At the termination of the unitrust period the Trustee shall distribute all of the then principaland income of the trust (other than any amount due the Predeceasing Recipient andor the Survivor Recipient under theterms of this trust) to one or more charitable organizations described in sectsect 170(c) 2055(a) and 2522(a) of the Code as[one of the named permissible recipients] shall appoint and direct by specific reference to this power of appointment by


inter vivos or testamentary instrument To the extent this power of appointment is not effectively exercised the principaland income not effectively appointed shall be distributed to one or more organizations described in sectsect 170(c) 2055(a)and 2522(a) of the Code as the Trustee shall select and in the proportions as the Trustee shall decide in the Trusteersquossole discretion If an organization fails to qualify as an organization described in sectsect 170(c) 2055(a) and 2522(a) of theCode at the time when any principal or income of the trust is to be distributed to it then the Trustee shall distribute thethen principal and income to one or more organizations described in sectsect 170(c) 2055(a) and 2522(a) of the Code as theTrustee shall select and in the proportions as the Trustee shall decide in the Trusteersquos sole discretion






In each taxable year of the trust during the unitrust period the Trustee shall pay to [permissible recipient] and to[permissible recipient] (hereinafter ldquothe Recipientsrdquo) in equal shares during their joint lives a unitrust amount equalto the lesser of (a) a fixed percentage amount equal to [a number no less than 5 and no more than 50] percent of thenet fair market value of the assets of the trust valued as of the valuation date (hereinafter ldquothe fixed percentage amountdescribed in (a) of paragraph 2rdquo) or (b) the trust income for the taxable year as defined in sect 643(b) of the Code andthe applicable regulations Upon the death of one of the Recipients (hereinafter ldquothe Predeceasing Recipientrdquo) theTrustee shall pay the entire unitrust amount to the survivor (hereinafter ldquothe Survivor Recipientrdquo) The valuation dateis the first day of each taxable year of the trust The first day of the unitrust period shall be the date property is firsttransferred to the trust and the last day of the unitrust period shall be the date of the Survivor Recipientrsquos death Theunitrust amount shall be paid in equal quarterly installments at the end of each calendar quarter from income Anyincome of the trust for a taxable year in excess of the unitrust amount shall be added to principal

(c) Replace paragraph 4 Proration of Unitrust Amount of the sample trust with the following paragraphProration of Unitrust Amount For a short taxable year and for the taxable year during which the unitrust periodends the Trustee shall prorate on a daily basis the fixed percentage amount described in (a) of paragraph 2 or if anadditional contribution is made to the trust the fixed percentage amount described in (a) of paragraph 6 In such ayear this prorated fixed percentage amount shall be used in place of the fixed percentage amount described in (a) ofparagraph 2 or in (a) of paragraph 6 to determine the unitrust amount payable for that year Upon the death of thePredeceasing Recipient the Trustee shall prorate on a daily basis the next regular unitrust payment due after the deathof the Predeceasing Recipient between the estate of the Predeceasing Recipient and the Survivor Recipient

(d) Replace paragraph 6 Additional Contributions of the sample trust with the following paragraphAdditional Contributions Notwithstanding paragraph 2 if any additional contributions are made to the trust afterthe initial contribution the unitrust amount for the year in which any additional contribution is made shall be equalto the lesser of (a) a fixed percentage amount equal to [same percentage used in (a) of paragraph 2] percent of thesum of (1) the net fair market value of the trust assets as of the valuation date (excluding the assets so added andany post-contribution income from and appreciation on such assets during that year) and (2) for each additionalcontribution during the year the fair market value of the assets so added as of the valuation date (including any


post-contribution income from and appreciation on such assets through the valuation date) multiplied by a fractionthe numerator of which is the number of days in the period that begins with the date of contribution and ends withthe earlier of the last day of the taxable year or the last day of the unitrust period and the denominator of which is thenumber of days in the period that begins with the first day of such taxable year and ends with the earlier of the lastday in such taxable year or the last day of the unitrust period (hereinafter ldquothe fixed percentage amount described in(a) of paragraph 6rdquo) or (b) the trust income for the taxable year as defined in sect 643(b) of the Code and the applicableregulations In a taxable year in which an additional contribution is made on or after the valuation date the assets soadded shall be valued as of the date of contribution without regard to any post-contribution income or appreciationrather than as of the valuation date





In each taxable year of the trust during the unitrust period the Trustee shall pay to [permissible recipient] and to[permissible recipient] (hereinafter ldquothe Recipientsrdquo) in equal shares during their joint lives a unitrust amount equalto the lesser of (a) a fixed percentage amount equal to [a number no less than 5 and no more than 50] percent of thenet fair market value of the assets of the trust valued as of the valuation date (hereinafter ldquothe fixed percentage amountdescribed in (a) of paragraph 2rdquo) or (b) the trust income for the taxable year as defined in sect 643(b) of the Code andthe applicable regulations The unitrust amount for a taxable year shall also include any amount of trust income forthe year that is in excess of [the fixed percentage amount determined under (a) of this paragraph for the year] butonly to the extent that the aggregate of the amounts paid to the Recipients in prior years was less than the aggregateof the amounts determined for all prior years under (a) of this paragraph and (a) of paragraph 6 Upon the death ofone of the Recipients (hereinafter ldquothe Predeceasing Recipientrdquo) the Trustee shall pay the entire unitrust amount tothe survivor (hereinafter ldquothe Survivor Recipientrdquo) The valuation date is the first day of each taxable year of thetrust The first day of the unitrust period shall be the date property is first transferred to the trust and the last dayof the unitrust period shall be the date of the Survivor Recipientrsquos death The unitrust amount shall be paid in equalquarterly installments at the end of each calendar quarter from income Any income of the trust for a taxable year inexcess of the unitrust amount shall be added to principal


(d) Replace paragraph 6 Additional Contributions of the sample trust with the following paragraphAdditional Contributions Notwithstanding paragraph 2 if any additional contributions are made to the trust after theinitial contribution the unitrust amount for the year in which any additional contribution is made shall be equal to thelesser of (a) a fixed percentage amount equal to [same percentage used in (a) of paragraph 2] percent of the sum of(1) the net fair market value of the trust assets as of the valuation date (excluding the assets so added and any post-contribution income from and appreciation on such assets during that year) and (2) for each additional contributionduring the year the fair market value of the assets so added as of the valuation date (including any post-contributionincome from and appreciation on such assets through the valuation date) multiplied by a fraction the numerator of


which is the number of days in the period that begins with the date of contribution and ends with the earlier of the lastday of the taxable year or the last day of the unitrust period and the denominator of which is the number of days inthe period that begins with the first day of such taxable year and ends with the earlier of the last day in such taxableyear or the last day of the unitrust period (hereinafter ldquothe fixed percentage amount described in (a) of paragraph 6rdquo)or (b) the trust income for the taxable year as defined in sect 643(b) of the Code and the applicable regulations Theunitrust amount for that year shall also include any amount of trust income for the year that is in excess of [the fixedpercentage amount determined under (a) of this paragraph for the year] but only to the extent that the aggregate ofthe amounts paid to the Recipients in prior years was less than the aggregate of the amounts determined for all prioryears under (a) of paragraph 2 and (a) of this paragraph In a taxable year in which an additional contribution is madeon or after the valuation date the assets so added shall be valued as of the date of contribution without regard to anypost-contribution income or appreciation rather than as of the valuation date


(1) Explanation The net income method (described in section 608 of this revenue procedure) or the net income with make-upmethod (described in section 609 of this revenue procedure) may be combined with the fixed percentage method for cal-culating the unitrust amount Section 1664ndash3(a)(1)(i)(c) More specifically the governing instrument may provide forpayment of the unitrust amount not less often than annually using the net income or the net income with make-up method ofcalculation and then in the years following a permissible triggering event (as described in sect 1664ndash3(a)(1)(i)(c) and (d))for payment of the unitrust amount using the fixed percentage method of calculation To provide for a one-time conversionfrom the net income or the net income with make-up method to the fixed percentage method of calculation the governinginstrument must provide that (i) the change in method is triggered on a specific date or by a single event whose occurrenceis not discretionary with or within the control of the trustees or any other persons (ii) the change in method occurs atthe beginning of the taxable year that immediately follows the taxable year during which the permissible triggering eventoccurs and (iii) following the trustrsquos conversion to the fixed percentage method the trust will pay at least annually to thepredeceasing recipient andor the survivor recipient the amount described in sect 1664ndash3(a)(1)(i)(a) and no amount describedin sect 1664ndash3(a)(1)(i)(b) Section 1664ndash3(a)(1)(i)(c) Thus any make-up amount described in sect 1664ndash3(a)(1)(i)(b)(2) thatis not paid by the beginning of the taxable year immediately following the taxable year during which the permissible trig-gering event occurs shall be forfeited by the predeceasing recipient andor the survivor recipient and added to principal




(i) Unitrust amount determined by net income method In each taxable year of the trust during the unitrust period theTrustee shall pay to [permissible recipient] and to [permissible recipient] (hereinafter ldquothe Recipientsrdquo) in equalshares during their joint lives a unitrust amount equal to the lesser of (a) a fixed percentage amount equal to [anumber no less than 5 and no more than 50] percent of the net fair market value of the assets of the trust valuedas of the valuation date (hereinafter ldquothe fixed percentage amount described in (a) of paragraph 2(i)rdquo) or (b) thetrust income for the taxable year as defined in sect 643(b) of the Code and the applicable regulations Upon thedeath of one of the Recipients (hereinafter ldquothe Predeceasing Recipientrdquo) the Trustee shall pay the entire unitrustamount to the survivor (hereinafter ldquothe Survivor Recipientrdquo) The unitrust amount shall be paid in equal quarterlyinstallments at the end of each calendar quarter from income Any income of the trust for a taxable year in excessof the unitrust amount shall be added to principal

(ii) Conversion to fixed percentage method of determining unitrust amount Notwithstanding paragraph 2(i) upon theoccurrence of [permissible triggering event as described in sect 1664ndash3(a)(1)(i)(c) and (d) of the Income Tax Reg-ulations] (hereinafter ldquothe triggering eventrdquo) and effective as of the first day of the taxable year that immediatelyfollows the triggering event (hereinafter ldquothe effective date of the triggering eventrdquo) in each remaining taxableyear of the trust during the unitrust period the Trustee shall pay to the Recipients in equal shares during their jointlives a unitrust amount equal to [same percentage used in (a) of paragraph 2(i)] percent of the net fair market valueof the trust assets as of the valuation date and upon the death of the Predeceasing Recipient the Trustee shall paythe entire unitrust amount to the Survivor Recipient Beginning on the effective date of the triggering event theTrustee shall no longer pay the amount equal to the lesser of (a) or (b) in paragraph 2(i) The unitrust amount shallbe paid in equal quarterly installments at the end of each calendar quarter from income and to the extent incomeis not sufficient from principal Any income of the trust for a taxable year in excess of the unitrust amount shallbe added to principal


(iii) In general The first day of the unitrust period shall be the date property is first transferred to the trust and thelast day of the unitrust period shall be the date of the Survivor Recipientrsquos death The valuation date is the firstday of each taxable year of the trust If for any year the net fair market value of the trust assets is incorrectlydetermined then within a reasonable period after the correct value is finally determined the Trustee shall pay tothe Predeceasing Recipient andor the Survivor Recipient (in the case of an undervaluation) or receive from thePredeceasing Recipient andor the Survivor Recipient (in the case of an overvaluation) an amount equal to thedifference between the unitrust amount(s) properly payable and the unitrust amount(s) actually paid




(iii) Proration of unitrust amount between Predeceasing Recipient and Survivor Recipient Upon the death of the Pre-deceasing Recipient the Trustee shall prorate on a daily basis the next regular unitrust payment due after the deathof the Predeceasing Recipient between the estate of the Predeceasing Recipient and the Survivor Recipient











In a taxable year in which an additional contribution is made on or after the valuation date the assets so added shallbe valued as of the date of contribution without regard to any post-contribution income or appreciation rather than


as of the valuation date Beginning on the effective date of the triggering event the trustee shall no longer pay theamount equal to the lesser of (a) or (b) in paragraph 6(i)




(i) Unitrust amount determined by net income with make-up method In each taxable year of the trust during theunitrust period the Trustee shall pay to [permissible recipient] and to [permissible recipient] (hereinafter ldquotheRecipientsrdquo) in equal shares during their joint lives a unitrust amount equal to the lesser of (a) a fixed percentageamount equal to [a number no less than 5 and no more than 50] percent of the net fair market value of the assetsof the trust valued as of the valuation date (hereinafter ldquothe fixed percentage amount described in (a) of paragraph2(i)rdquo) or (b) the trust income for the taxable year as defined in sect 643(b) of the Code and the applicable regulationsThe unitrust amount for a taxable year shall also include any amount of trust income for the year that is in excessof [the fixed percentage amount determined under (a) of paragraph 2(i) for the year] but only to the extent thatthe aggregate of the amounts paid to the Recipients in prior years was less than the aggregate of the amountsdetermined for all prior years under (a) of paragraph 2(i) and (a) of paragraph 6(i) Upon the death of one of theRecipients (herein ldquothe Predeceasing Recipientrdquo) the Trustee shall pay the entire unitrust amount to the survivor(herein ldquothe Survivor Recipientrdquo) The unitrust amount shall be paid in equal quarterly installments at the end ofeach calendar quarter from income Any income of the trust for a taxable year in excess of the unitrust amountshall be added to principal

(ii) Conversion to fixed percentage method of determining unitrust amount Notwithstanding paragraph 2(i) upon theoccurrence of [permissible triggering event as described in sect 1664ndash3(a)(1)(i)(c) and (d) of the Income Tax Reg-ulations] (hereinafter ldquothe triggering eventrdquo) and effective as of the first day of the taxable year that immediatelyfollows the triggering event (hereinafter ldquothe effective date of the triggering eventrdquo) in each remaining taxableyear of the trust during the unitrust period the Trustee shall pay to the Recipients in equal shares during their jointlives a unitrust amount equal to [same percentage used in (a) of paragraph 2(i)] percent of the net fair marketvalue of the trust assets as of the valuation date and upon the death of the Predeceasing Recipient the Trusteeshall pay the entire unitrust amount to the Survivor Recipient Beginning on the effective date of the triggeringevent the Trustee shall no longer pay the amount equal to the lesser of (a) or (b) in paragraph 2(i) and shall notpay any amount of trust income described in the second sentence of paragraph 2(i) The unitrust amount shall bepaid in equal quarterly installments at the end of each calendar quarter from income and to the extent income isnot sufficient from principal Any income of the trust for a taxable year in excess of the unitrust amount shall beadded to principal













The unitrust amount for that year shall also include any amount of trust income for the year that is in excess of[the fixed percentage amount determined under (a) of paragraph 6(i) for the year] but only to the extent thatthe aggregate of the amounts paid to the Recipients in prior years was less than the aggregate of the amountsdetermined for all prior years under (a) of paragraph 2(i) and (a) of paragraph 6(i) In a taxable year in which anadditional contribution is made on or after the valuation date the assets so added shall be valued as of the date ofcontribution without regard to any post-contribution income or appreciation rather than as of the valuation date










26 CFR 601201 Rulings and determination letters(Also Part I sectsect 170 664 2055 1170Andash6 1664ndash1 1664ndash3 1664ndash4 202055ndash2)


SECTION 1 PURPOSE

This revenue procedure contains an annotated sample declaration of trust and alternate provisions that meet the requirements ofsect 664(d)(2) and (d)(3) of the Internal Revenue Code for a testamentary charitable remainder unitrust (CRUT) providing for unitrustpayments for one measuring life followed by the distribution of trust assets to a charitable remainderman


Previously the Internal Revenue Service issued sample trust instruments for certain types of CRUTs The Service is updating thepreviously issued samples and issuing new samples for additional types of CRUTs annotations and alternate sample provisions areincluded as further guidance In addition to the sample trust instrument included in this revenue procedure for a testamentary CRUTproviding for unitrust payments for one measuring life samples are provided in other separate revenue procedures for

(a) an inter vivos CRUT providing for unitrust payments for one measuring life (see Rev Proc 2005ndash52) superseding RevProc 89ndash20 1989ndash1 CB 841 and section 4 of Rev Proc 90ndash31 1990ndash1 CB 539)


2005ndash54 superseding section 4 of Rev Proc 90ndash30 1990ndash1 CB 534 and section 5 of Rev Proc 90ndash31)(d) an inter vivos CRUT providing for unitrust payments payable concurrently and consecutively for two measuring lives (see

Rev Proc 2005ndash55 superseding section 5 of Rev Proc 90ndash30 and section 6 of Rev Proc 90ndash31)(e) a testamentary CRUT providing for unitrust payments for a term of years (see Rev Proc 2005ndash57)(f) a testamentary CRUT providing for unitrust payments payable consecutively for two measuring lives (see Rev Proc




Section 4 of this revenue procedure provides a sample declaration of trust for a testamentary CRUT with one measuring life thatis created by an individual who is a citizen or resident of the United States Section 5 of this revenue procedure provides annotationsto the provisions of the sample trust Section 6 of this revenue procedure provides samples of certain alternate provisions concerning(01) the payment of part of the unitrust amount to an organization described in sect 170(c) (02) a qualified contingency (03) thelast unitrust payment to the recipient (04) a power of appointment to designate the charitable remainderman (05) the net incomemethod of calculating the unitrust amount (06) the net income with make-up method of calculating the unitrust amount and (07) acombination of methods for calculating the unitrust amount

For transfers to a qualifying CRUT as defined in sect 664(d)(2) and if applicable sect 664(d)(3) the remainder interest will be deductibleby a citizen or resident of the United States under sect 2055(e)(2)(A) for estate tax purposes if the other requirements of sect 2055(e)(2)(A)(that is the requirements not relating to the provisions of the governing instrument) also are met The Service will recognize a trustas a qualified CRUT meeting all of the requirements of sect 664(d)(2) and if applicable sect 664(d)(3) if the trust operates in a mannerconsistent with the terms of the trust instrument if the trust is a valid trust under applicable local law and if the trust instrument (i) issubstantially similar to the sample in section 4 of this revenue procedure or (ii) properly integrates one or more alternate provisionsfrom section 6 of this revenue procedure into a document substantially similar to the sample in section 4 of this revenue procedureA trust that contains substantive provisions in addition to those provided in section 4 of this revenue procedure (other than properlyintegrated alternate provisions from section 6 of this revenue procedure or provisions necessary to establish a valid trust under appli-cable local law that are not inconsistent with the applicable federal tax requirements) or that omits any of the provisions of section4 of this revenue procedure (unless an alternate provision from section 6 of this revenue procedure is properly integrated) will notnecessarily be disqualified but neither will that trust be assured of qualification under the provisions of this revenue procedure TheService generally will not issue a letter ruling on whether a testamentary trust created by an individual providing for unitrust paymentsfor one measuring life qualifies as a CRUT The Service however generally will issue letter rulings on the effect of substantive trustprovisions other than those contained in sections 4 and 6 of this revenue procedure on the qualification of a trust as a CRUT


SECTION 4 SAMPLE TESTAMENTARY CHARITABLE REMAINDER UNITRUST mdash ONE LIFE

I give devise and bequeath [property bequeathed] to my Trustee in trust to be administered under this provision I intend thisbequest to establish a charitable remainder unitrust within the meaning of Rev Proc 2005ndash56 and sect 664(d)(2) of the Internal Rev-enue Code (hereinafter ldquothe Coderdquo) The trust shall be known as the Charitable Remainder Unitrust and I herebydesignate as the initial trustee (hereinafter ldquothe Trusteerdquo)

1 Payment of Unitrust Amount In each taxable year of the trust during the unitrust period the Trustee shall pay to [permissiblerecipient] (hereinafter ldquothe Recipientrdquo) a unitrust amount equal to [a number no less than 5 and no more than 50] percent of the net fairmarket value of the assets of the trust valued as of the first day of each taxable year of the trust (hereinafter ldquothe valuation daterdquo) Thefirst day of the unitrust period shall be the date of my death and the last day of the unitrust period shall be the date of the Recipientrsquosdeath The unitrust amount shall be paid in equal quarterly installments at the end of each calendar quarter from income and to theextent income is not sufficient from principal Any income of the trust for a taxable year in excess of the unitrust amount shall beadded to principal If for any year the net fair market value of the trust assets is incorrectly determined then within a reasonableperiod after the correct value is finally determined the Trustee shall pay to the Recipient (in the case of an undervaluation) or receivefrom the Recipient (in the case of an overvaluation) an amount equal to the difference between the unitrust amount(s) properly payableand the unitrust amount(s) actually paid

2 Deferral Provision The obligation to pay the unitrust amount shall commence with the date of my death but payment of theunitrust amount may be deferred from this date until the end of the taxable year in which the trust is completely funded Within areasonable time after the end of the taxable year in which the trust is completely funded the Trustee must pay to the Recipient (in thecase of an underpayment) or receive from the Recipient (in the case of an overpayment) the difference between any unitrust amountsactually paid plus interest and the unitrust amounts payable plus interest The interest shall be computed for any period at the rateof interest compounded annually that the federal income tax regulations under sect 664 of the Code prescribe for this computation

3 Proration of Unitrust Amount For a short taxable year and for the taxable year during which the unitrust period ends the Trusteeshall prorate on a daily basis the unitrust amount described in paragraph 1

4 Distribution to Charity At the termination of the unitrust period the Trustee shall distribute all of the then principal and incomeof the trust (other than any amount due the Recipient under the terms of this trust) to [designated remainderman] (hereinafter ldquotheCharitable Organizationrdquo) If the Charitable Organization is not an organization described in sectsect 170(c) and 2055(a) of the Code at thetime when any principal or income of the trust is to be distributed to it then the Trustee shall distribute the then principal and incometo one or more organizations described in sectsect 170(c) and 2055(a) of the Code as the Trustee shall select and in the proportions as theTrustee shall decide in the Trusteersquos sole discretion

5 Additional Contributions No additional contributions shall be made to the trust after the initial contribution The initial contri-bution however shall be deemed to consist of all property passing to the trust by reason of my death



8 Taxable Year The taxable year of the trust shall be the calendar year9 Governing Law The operation of the trust shall be governed by the laws of the State of However the Trustee

is prohibited from exercising any power or discretion granted under said laws that would be inconsistent with the qualification of thetrust as a charitable remainder unitrust under sect 664(d)(2) of the Code and the corresponding regulations





SECTION 5 ANNOTATIONS REGARDING SAMPLE TESTAMENTARY CHARITABLE REMAINDERUNITRUST mdash ONE LIFE

01 Annotations for Introductory Paragraph of the Sample Trust

(1) Factors concerning qualification of trust A deduction must be allowable under sect 2055 for property contributed to the trustSection 1664ndash1(a)(1)(iii)(a) of the Income Tax Regulations The trust must meet the definition of and function exclusivelyas a charitable remainder trust from the creation of the trust Section 1664ndash1(a)(4) Solely for purposes of sect 664 a trustis deemed created at the earliest time that no person is treated as the owner of the entire trust under subpart E part 1subchapter J chapter 1 subtitle A of the Code (subpart E) For purposes of sect 2055 a charitable remainder trust shall bedeemed created at the date of death of the decedent (even though the trust is not funded until the end of a reasonable periodof administration or settlement) if the obligation to pay the unitrust amount with respect to the property passing in trust atthe death of the decedent begins as of the date of death of the decedent even though the requirement to pay this amount isdeferred in accordance with sect 1664ndash1(a)(5)(i) In addition funding the trust with certain types of assets may disqualify acharitable remainder trust See sect 1664ndash1(a)(7) and Rev Rul 73ndash610 1973ndash2 CB 213








(5) Rules applicable to valuation Paragraph 1 Payment of Unitrust Amount of the sample trust specifies that the net fairmarket value of trust assets is to be valued as of the first day of each taxable year of the trust However the value of thetrust assets may be determined on any one date during the taxable year of the trust or by taking the average of valuationsmade on more than one date during the taxable year of the trust so long as the same valuation date or dates and the samevaluation methods are used each year If the governing instrument does not specify the valuation date or dates the trusteemust select the date or dates and indicate the selection on the first Form 5227 ldquoSplit-Interest Trust Information Returnrdquothat the trust must file Section 1664ndash3(a)(1)(iv) Note that if the valuation date is a date other than the first day of eachtaxable year of the trust it may be necessary to modify the provisions in the sample trust regarding (i) the timing of the


payment of the unitrust amount and (ii) the proration of the unitrust amount in a short taxable year and the last taxable yearof the unitrust period See sect 1664ndash3(a)(1)(v)

(6) Payment of unitrust amount by close of taxable year Generally the unitrust amount for any taxable year if computed underthe fixed percentage method must be paid before the close of the taxable year for which it is due For circumstances underwhich the unitrust amount computed under the fixed percentage method may be paid within a reasonable time after theclose of the taxable year see sect 1664ndash3(a)(1)(i)(g) and (k) See section 503(1) of this revenue procedure for additionalinformation regarding the deferral of the payment of the unitrust amount until the end of the taxable year in which the trustis completely funded



03 Annotations for Paragraph 2 Deferral Provision of the Sample Trust

(1) Deferral of requirement to pay unitrust amount The deferral provision in paragraph 2 of the sample trust authorizes defer-ring the payment of the unitrust amount until the end of the taxable year of the trust in which the trust is completely fundedSection 1664ndash1(a)(5)(i) provides the operational rule for deferring payment of the unitrust amount in this circumstanceThe deferral provision in paragraph 2 of the sample trust uses the method for computing deferred payments that is providedin sect 1664ndash1(a)(5)(i) Note that sect 1664ndash1(a)(5)(ii) provides an alternate method for determining the amount described insect 1664ndash1(a)(5)(i)(b) ie the unitrust amounts payable plus interest on those amounts Rev Rul 92ndash57 1992ndash2 CB 123provides sample language to be included in the governing instrument if the alternate method set forth in sect 1664ndash1(a)(5)(ii)for determining the amount described in sect 1664ndash1(a)(5)(i)(b) is selected

(2) Treatment of distributions For the proper treatment of distributions to a charitable remainder trust or to the recipientduring the period of administration of an estate or settlement of a trust that is not a charitable remainder trust seesect 1664ndash1(a)(5)(iii)





(1) Minimum value of remainder As noted in section 502(3) of this revenue procedure the value of the charitable remainderinterest (determined under sect 7520) is required to be at least 10 percent of the net fair market value of the property contributedto the trust as finally determined for federal estate tax purposes Section 664(d)(2)(D)


(3) Designated remainderman Any named charitable remainderman must be an organization described in sectsect 170(c) and2055(a) at the time of the transfer to the CRUT See sect 664(d)(2)(C) The trust instrument may restrict the charitable re-mainderman to an organization described in sectsect 170(c) and 2055(a) but grant to a trustee or other person the power todesignate the actual charitable remainderman See section 604 of this revenue procedure for an alternate provision inwhich the recipient is granted a power of appointment to designate the charitable remainderman

(4) Multiple remaindermen The remainder interest may pass to more than one charitable organization as long as each organi-zation is described in sectsect 170(c) and 2055(a) Section 1664ndash3(a)(6)(i)

(5) Alternative remaindermen The trust instrument of a CRUT must provide a means for selecting alternative charitable re-maindermen in the event any designated organization is not qualified at the time any payments are to be made to it from thetrust Section 1664ndash3(a)(6)(iv) This requirement is satisfied in the sample trust by conferring the power upon the trusteeto designate an alternative charitable remainderman Note that the donor may designate one or more alternative charitable


remaindermen in the trust instrument however the trust instrument must continue to provide a means for selecting an al-ternative charitable remainderman if any designated organization is not qualified at the time payments are to be made to itfrom the trust








(2) Prohibitions against certain investments and excess business holdings Prohibitions against investments that jeopardizethe exempt purpose of the trust within the meaning of sect 4944 as modified by sect 4947(a)(2)(A) and against retaining anyexcess business holdings within the meaning of sect 4943 as modified by sect 4947(a)(2)(A) are required if the trust providesfor payment of any part of a unitrust amount to an organization described in sect 170(c) and an estate tax charitable deductionis sought for the organizationrsquos interest in the unitrust amount See sect 4947(b)(3) See section 601 of this revenue procedurefor an alternate provision that provides for payment of part of the unitrust amount to an organization described in sect 170(c)

(3) Trust to continue in existence for benefit of charity The governing instrument requirements of sect 508(e) must be includedin the trust instrument if after the termination of the unitrust period (i) the trust instrument provides that the trust shallcontinue in existence for the benefit of the charitable remainderman and as a result the trust will become subject to theprovisions of sect 4947(a)(1) and (ii) the trust will be treated as a private foundation within the meaning of sect 509(a) as mod-ified by sect 4947(a)(1) Except as provided in paragraph 7 of the sample trust the trust instrument may limit the applicationof the provisions of sect 508(e) to the period after the termination of the unitrust period when the trust continues in existencefor the benefit of the charitable remainderman

SECTION 6 ALTERNATE PROVISIONS FOR SAMPLE TESTAMENTARY CHARITABLE REMAINDERUNITRUST mdash ONE LIFE


(1) Explanation An organization described in sect 170(c) may receive part but not all of any unitrust amount Section664(d)(2)(A) If an estate tax charitable deduction is sought for the present value of the unitrust interest passing to acharitable organization the trust instrument must contain additional provisions First the trust instrument must specify theportion of each unitrust payment that is payable to the noncharitable recipient and to the charitable organization describedin sectsect 170(c) and 2055(a) Second the trust instrument must contain a means for selecting an alternative qualified charitableorganization if the designated organization is not a qualified organization at the time when any unitrust amount is to bepaid to it Third the trust instrument must contain prohibitions against investments that jeopardize the exempt purpose ofthe trust within the meaning of sect 4944 as modified by sect 4947(a)(2)(A) and against retaining any excess business holdingswithin the meaning of sect 4943 as modified by sect 4947(a)(2)(A)


Payment of Unitrust Amount The unitrust amount is equal to [a number no less than 5 and no more than 50] percent ofthe net fair market value of the assets of the trust valued as of the first day of each taxable year of the trust (hereinafterldquothe valuation daterdquo) In each taxable year of the trust during the unitrust period the Trustee shall pay [the percentageof the unitrust amount payable to the noncharitable recipient] percent of the unitrust amount to [permissible recipient]


(hereinafter ldquothe Recipientrdquo) and [the percentage of the unitrust amount payable to the charitable recipient] percent ofthe unitrust amount to [an organization described in sectsect 170(c) and 2055(a) of the Code] (hereinafter ldquothe CharitableRecipientrdquo) The first day of the unitrust period shall be the date of my death and the last day of the unitrust periodshall be the date of the Recipientrsquos death If the Charitable Recipient is not an organization described in sectsect 170(c) and2055(a) of the Code at the time when any unitrust payment is to be distributed to it then the Trustee shall distributethat unitrust payment to one or more organizations described in sectsect 170(c) and 2055(a) of the Code as the Trusteeshall select and in the proportions as the Trustee shall decide in the Trusteersquos sole discretion The unitrust amountshall be paid in equal quarterly installments at the end of each calendar quarter from income and to the extent incomeis not sufficient from principal Any income of the trust for a taxable year in excess of the unitrust amount shallbe added to principal If for any year the net fair market value of the trust assets is incorrectly determined thenwithin a reasonable period after the correct value is finally determined the Trustee shall pay to the Recipient and theCharitable Recipient (in the case of an undervaluation) or receive from the Recipient and the Charitable Recipient (inthe case of an overvaluation) an amount equal to the difference between the unitrust amount(s) properly payable andthe unitrust amount(s) actually paid

(b) Replace each reference to ldquothe Recipientrdquo in paragraph 2 Deferral Provision of the sample trust with a reference to ldquotheRecipient and the Charitable Recipientrdquo

(c) Replace the first parenthetical in paragraph 4 Distribution to Charity of the sample trust with the following parenthetical(other than any amount due the Recipient and the Charitable Recipient under the terms of this trust)





The first day of the unitrust period shall be the date of my death and the last day of the unitrust period shall be the dateof the Recipientrsquos death or if earlier the date on which occurs the [qualified contingency]


(1) Explanation As an alternative to prorating the unitrust amount in the taxable year of the recipientrsquos death the obligationto pay the unitrust amount may terminate with the last regular payment preceding the recipientrsquos death However the factthat the recipient may not receive a final prorated payment shall not be taken into account for purposes of determiningthe present value of the remainder interest Section 1664ndash3(a)(5)(i) Note that although the obligation to pay the unitrustamount may terminate with the last regular payment preceding the recipientrsquos death the trustee must pay to the recipientrsquosestate any amounts allocated to the payments payable before the recipientrsquos death that are due as a result of an adjustmentto the unitrust amount payable for that year as in the case of an undervaluation

(2) Instructions for use Replace paragraph 3 Proration of Unitrust Amount of the sample trust with the following paragraphProration of Unitrust Amount For a short taxable year the Trustee shall prorate on a daily basis the unitrust amountdescribed in paragraph 1 In the taxable year of the trust during which the unitrust period ends however the obligationof the Trustee to pay the unitrust amount shall terminate with the last regular quarterly installment preceding the deathof the Recipient



(2) Instructions for use Replace paragraph 4 Distribution to Charity of the sample trust with the following paragraphDistribution to Charity At the termination of the unitrust period the Trustee shall distribute all of the then principal andincome of the trust (other than any amount due the Recipient under the terms of this trust) to one or more charitable orga-nizations described in sectsect 170(c) and 2055(a) of the Code as the Recipient shall appoint and direct by specific referenceto this power of appointment by inter vivos or testamentary instrument To the extent the Recipient fails to effectivelyexercise the power of appointment the principal and income not effectively appointed shall be distributed to one or moreorganizations described in sectsect 170(c) and 2055(a) of the Code as the Trustee shall select and in the proportions as the


Trustee shall decide in the Trusteersquos sole discretion If an organization fails to qualify as an organization described insectsect 170(c) and 2055(a) of the Code at the time when any principal or income of the trust is to be distributed to it then theTrustee shall distribute the then principal and income to one or more organizations described in sectsect 170(c) and 2055(a)of the Code as the Trustee shall select and in the proportions as the Trustee shall decide in the Trusteersquos sole discretion






In each taxable year of the trust during the unitrust period the Trustee shall pay to [permissible recipient] (hereinafterldquothe Recipientrdquo) a unitrust amount equal to the lesser of (a) a fixed percentage amount equal to [a number no less than5 and no more than 50] percent of the net fair market value of the assets of the trust valued as of the valuation date(hereinafter ldquothe fixed percentage amount described in (a) of paragraph 1rdquo) or (b) the trust income for the taxable yearas defined in sect 643(b) of the Code and the applicable regulations The valuation date is the first day of each taxableyear of the trust The first day of the unitrust period shall be the date of my death and the last day of the unitrustperiod shall be the date of the Recipientrsquos death The unitrust amount shall be paid in equal quarterly installmentsat the end of each calendar quarter from income Any income of the trust for a taxable year in excess of the unitrustamount shall be added to principal

(c) Replace paragraph 3 Proration of Unitrust Amount of the sample trust with the following paragraphProration of Unitrust Amount For a short taxable year and for the taxable year during which the unitrust periodends the Trustee shall prorate on a daily basis the fixed percentage amount described in (a) of paragraph 1 In such ayear this prorated fixed percentage amount shall be used in place of the fixed percentage amount described in (a) ofparagraph 1 to determine the unitrust amount payable for that year



(2) Instructions for use



(b) Replace the first four sentences of paragraph 1 Payment of Unitrust Amount of the sample trust with the followingIn each taxable year of the trust during the unitrust period the Trustee shall pay to [permissible recipient] (hereinafterldquothe Recipientrdquo) a unitrust amount equal to the lesser of (a) a fixed percentage amount equal to [a number no less than5 and no more than 50] percent of the net fair market value of the assets of the trust valued as of the valuation date(hereinafter ldquothe fixed percentage amount described in (a) of paragraph 1rdquo) or (b) the trust income for the taxable yearas defined in sect 643(b) of the Code and the applicable regulations The unitrust amount for a taxable year shall alsoinclude any amount of trust income for the year that is in excess of [the fixed percentage amount determined under(a) of this paragraph for the year] but only to the extent that the aggregate of the amounts paid to the Recipient inprior years was less than the aggregate of the amounts determined for all prior years under (a) of this paragraph Thevaluation date is the first day of each taxable year of the trust The first day of the unitrust period shall be the date ofmy death and the last day of the unitrust period shall be the date of the Recipientrsquos death The unitrust amount shallbe paid in equal quarterly installments at the end of each calendar quarter from income Any income of the trust fora taxable year in excess of the unitrust amount shall be added to principal








(ii) Conversion to fixed percentage method of determining unitrust amount Notwithstanding paragraph 1(i) upon theoccurrence of [permissible triggering event as described in sect 1664ndash3(a)(1)(i)(c) and (d) of the Income Tax Reg-ulations] (hereinafter ldquothe triggering eventrdquo) and effective as of the first day of the taxable year that immediatelyfollows the triggering event (hereinafter ldquothe effective date of the triggering eventrdquo) the Trustee shall pay to theRecipient in each remaining taxable year of the trust during the unitrust period a unitrust amount equal to [samepercentage used in (a) of paragraph 1(i)] percent of the net fair market value of the trust assets as of the valuation


date Beginning on the effective date of the triggering event the Trustee shall no longer pay the amount equal tothe lesser of (a) or (b) in paragraph 1(i) The unitrust amount shall be paid in equal quarterly installments at theend of each calendar quarter from income and to the extent income is not sufficient from principal Any incomeof the trust for a taxable year in excess of the unitrust amount shall be added to principal

(iii) In general The first day of the unitrust period shall be the date of my death and the last day of the unitrust periodshall be the date of the Recipientrsquos death The valuation date is the first day of each taxable year of the trust If forany year the net fair market value of the trust assets is incorrectly determined then within a reasonable period afterthe correct value is finally determined the Trustee shall pay to the Recipient (in the case of an undervaluation) orreceive from the Recipient (in the case of an overvaluation) an amount equal to the difference between the unitrustamount(s) properly payable and the unitrust amount(s) actually paid


(i) Proration in years preceding the effective date of triggering event For a short taxable year before the effective dateof the triggering event which may include the taxable year during which the unitrust period ends the Trustee shallprorate on a daily basis the fixed percentage amount described in (a) of paragraph 1(i) In such a year this proratedfixed percentage amount shall be used in place of the fixed percentage amount described in (a) of paragraph 1(i)to determine the unitrust amount payable for that year

(ii) Proration on and after effective date of triggering event For a short taxable year beginning on or after the effectivedate of the triggering event which may include the taxable year during which the unitrust period ends the Trusteeshall prorate on a daily basis the unitrust amount described in paragraph 1(ii)




(i) Unitrust amount determined by net income with make-up method In each taxable year of the trust during theunitrust period the Trustee shall pay to [permissible recipient] (hereinafter ldquothe Recipientrdquo) a unitrust amountequal to the lesser of (a) a fixed percentage amount equal to [a number no less than 5 and no more than 50] percentof the net fair market value of the assets of the trust valued as of the valuation date (hereinafter ldquothe fixed percentageamount described in (a) of paragraph 1(i)rdquo) or (b) the trust income for the taxable year as defined in sect 643(b) ofthe Code and the applicable regulations The unitrust amount for a taxable year shall also include any amount oftrust income for the year that is in excess of [the fixed percentage amount determined under (a) of paragraph 1(i)for the year] but only to the extent that the aggregate of the amounts paid to the Recipient in prior years was lessthan the aggregate of the amounts determined for all prior years under (a) of paragraph 1(i) The unitrust amountshall be paid in equal quarterly installments at the end of each calendar quarter from income Any income of thetrust for a taxable year in excess of the unitrust amount shall be added to principal













SECTION 1 PURPOSE

This revenue procedure contains an annotated sample declaration of trust and alternate provisions that meet the requirements ofsect 664(d)(2) and (d)(3) of the Internal Revenue Code for a testamentary charitable remainder unitrust (CRUT) providing for unitrustpayments for a term of years followed by the distribution of trust assets to a charitable remainderman


Previously the Internal Revenue Service issued sample trust instruments for certain types of CRUTs The Service is updating thepreviously issued samples and issuing new samples for additional types of CRUTs annotations and alternate sample provisions areincluded as further guidance In addition to the sample trust instrument included in this revenue procedure for a testamentary CRUTproviding for unitrust payments for a term of years samples are provided in separate revenue procedures for




Rev Proc 2005ndash55 superseding section 5 of Rev Proc 90ndash30 and section 6 of Rev Proc 90ndash31)(e) a testamentary CRUT providing for unitrust payments for one measuring life (see Rev Proc 2005ndash56 superseding section

6 of Rev Proc 90ndash30 and section 7 of Rev Proc 90ndash31)(f) a testamentary CRUT providing for unitrust payments payable consecutively for two measuring lives (see Rev Proc




Section 4 of this revenue procedure provides a sample declaration of trust for a testamentary CRUT that is created by an individualwho is a citizen or resident of the United States and that provides for a term of years unitrust period Section 5 of this revenueprocedure provides annotations to the provisions of the sample trust Section 6 of this revenue procedure provides samples of certainalternate provisions concerning (01) the payment of part of the unitrust amount to an organization described in sect 170(c) (02) theapportionment of the unitrust amount among members of a named class in the discretion of the trustee (03) a qualified contingency(04) a power of appointment to designate the charitable remainderman (05) the net income method of calculating the unitrust amount


(06) the net income with make-up method of calculating the unitrust amount and (07) a combination of methods for calculating theunitrust amount

For transfers to a qualifying CRUT as defined in sect 664(d)(2) and if applicable sect 664(d)(3) the remainder interest will be deductibleby a citizen or resident of the United States under sect 2055(e)(2)(A) for estate tax purposes if the other requirements of sect 2055(e)(2)(A)(that is the requirements not relating to the provisions of the governing instrument) also are met The Service will recognize a trustas a qualified CRUT meeting all of the requirements of sect 664(d)(2) and if applicable sect 664(d)(3) if the trust operates in a mannerconsistent with the terms of the trust instrument if the trust is a valid trust under applicable local law and if the trust instrument (i) issubstantially similar to the sample in section 4 of this revenue procedure or (ii) properly integrates one or more alternate provisionsfrom section 6 of this revenue procedure into a document substantially similar to the sample in section 4 of this revenue procedure Atrust that contains substantive provisions in addition to those provided in section 4 of this revenue procedure (other than properly inte-grated alternate provisions from section 6 of this revenue procedure or provisions necessary to establish a valid trust under applicablelocal law that are not inconsistent with the applicable federal tax requirements) or that omits any of the provisions of section 4 of thisrevenue procedure (unless an alternate provision from section 6 of this revenue procedure is properly integrated) will not necessarilybe disqualified but neither will that trust be assured of qualification under the provisions of this revenue procedure The Servicegenerally will not issue a letter ruling on whether a testamentary trust created by an individual and having a term of years unitrustperiod qualifies as a CRUT The Service however generally will issue letter rulings on the effect of substantive trust provisions otherthan those contained in sections 4 and 6 of this revenue procedure on the qualification of a trust as a CRUT

SECTION 4 SAMPLE TESTAMENTARY CHARITABLE REMAINDER UNITRUST mdash TERM OF YEARS

I give devise and bequeath [property bequeathed] to my Trustee in trust to be administered under this provision I intend thisbequest to establish a charitable remainder unitrust within the meaning of Rev Proc 2005ndash57 and sect 664(d)(2) of the Internal RevenueCode (hereinafter ldquothe Coderdquo) The trust shall be known as the Charitable Remainder Unitrust and I hereby designate

as the initial trustee (hereinafter ldquothe Trusteerdquo)1 Payment of Unitrust Amount In each taxable year of the trust during the unitrust period the Trustee shall pay to [permissible

recipient] (hereinafter ldquothe Recipientrdquo) a unitrust amount equal to [a number no less than 5 and no more than 50] percent of the netfair market value of the assets of the trust valued as of the first day of each taxable year of the trust (hereinafter ldquothe valuation daterdquo)The unitrust period shall be a period of [a number not more than 20] years The first day of the unitrust period shall be the date of mydeath and the last day of the unitrust period shall be the day preceding the [ordinal number corresponding to the length of the unitrustperiod] anniversary of that date The unitrust amount shall be paid in equal quarterly installments at the end of each calendar quarterfrom income and to the extent income is not sufficient from principal Any income of the trust for a taxable year in excess of theunitrust amount shall be added to principal If for any year the net fair market value of the trust assets is incorrectly determinedthen within a reasonable period after the correct value is finally determined the Trustee shall pay to the Recipient (in the case of anundervaluation) or receive from the Recipient (in the case of an overvaluation) an amount equal to the difference between the unitrustamount(s) properly payable and the unitrust amount(s) actually paid








8 Taxable Year The taxable year of the trust shall be the calendar year9 Governing Law The operation of the trust shall be governed by the laws of the State of However the Trustee is

prohibited from exercising any power or discretion granted under said laws that would be inconsistent with the qualification of thetrust as a charitable remainder unitrust under sect 664(d)(2) of the Code and the corresponding regulations




SECTION 5 ANNOTATIONS REGARDING SAMPLE TESTAMENTARY CHARITABLE REMAINDERUNITRUST mdash TERM OF YEARS




(3) Trustee provisions Alternate or successor trustees may be designated in the trust instrument In addition the trust instru-ment may contain other administrative provisions relating to the trusteersquos duties and powers as long as the provisions do notconflict with the rules governing charitable remainder trusts under sect 664 and the regulations thereunder Note that certainpowers given to certain persons serving as the trustee may cause the trustee to be treated as the owner of the trust undersubpart E and thus disqualify the trust as a charitable remainder trust See sect 1664ndash1(a)(4)









(7) Rules applicable to valuation Paragraph 1 Payment of Unitrust Amount of the sample trust specifies that the net fairmarket value of trust assets is to be valued as of the first day of each taxable year of the trust However the value of thetrust assets may be determined on any one date during the taxable year of the trust or by taking the average of valuationsmade on more than one date during the taxable year of the trust so long as the same valuation date or dates and the samevaluation methods are used each year If the governing instrument does not specify the valuation date or dates the trusteemust select the date or dates and indicate the selection on the first Form 5227 ldquoSplit-Interest Trust Information Returnrdquothat the trust must file Section 1664ndash3(a)(1)(iv) Note that if the valuation date is a date other than the first day of eachtaxable year of the trust it may be necessary to modify the provisions in the sample trust regarding (i) the timing of thepayment of the unitrust amount and (ii) the proration of the unitrust amount in a short taxable year and the last taxable yearof the unitrust period See sect 1664ndash3(a)(1)(v)











(1) Minimum value of remainder As noted in section 502(5) of this revenue procedure the value of the charitable remainderinterest (determined under sect 7520) is required to be at least 10 percent of the net fair market value of the property con-tributed to the trust as of the date of its contribution to the trust as finally determined for federal estate tax purposes Section664(d)(2)(D)











(1) Payment of the unitrust amount Payment of the unitrust amount to the recipient is not considered an act of self dealingwithin the meaning of sect 4941(d) as modified by sect 4947(a)(2)(A) or a taxable expenditure within the meaning of sect 4945(d)as modified by sect 4947(a)(2)(A) Section 534947ndash1(c)(2) of the Foundation and Similar Excise Taxes Regulations


(3) Trust to continue in existence for benefit of charity The governing instrument requirements of sect 508(e) must be includedin the trust instrument if after the termination of the unitrust period (i) the trust instrument provides that the trust shallcontinue in existence for the benefit of the charitable remainderman and as a result the trust will become subject to theprovisions of sect 4947(a)(1) and (ii) the trust will be treated as a private foundation within the meaning of sect 509(a) as mod-ified by sect 4947(a)(1) Except as provided in paragraph 7 of the sample trust the trust instrument may limit the application


of the provisions of sect 508(e) to the period after the termination of the unitrust period when the trust continues in existencefor the benefit of the charitable remainderman

SECTION 6 ALTERNATE PROVISIONS FOR SAMPLE TESTAMENTARY CHARITABLE REMAINDERUNITRUST mdash TERM OF YEARS




Payment of Unitrust Amount The unitrust amount is equal to [a number no less than 5 and no more than 50] percent ofthe net fair market value of the assets of the trust valued as of the first day of each taxable year of the trust (hereinafterldquothe valuation daterdquo) In each taxable year of the trust during the unitrust period the Trustee shall pay [the percentageof the unitrust amount payable to the noncharitable recipient] percent of the unitrust amount to [permissible recipient](hereinafter ldquothe Recipientrdquo) and [the percentage of the unitrust amount payable to the charitable recipient] percent ofthe unitrust amount to [an organization described in sectsect 170(c) and 2055(a) of the Code] (hereinafter ldquothe CharitableRecipientrdquo) The unitrust period shall be a period of [a number not more than 20 years] years The first day ofthe unitrust period shall be the date of my death and the last day of the unitrust period shall be the day precedingthe [ordinal number corresponding to the length of the unitrust period] anniversary of that date If the CharitableRecipient is not an organization described in sectsect 170(c) and 2055(a) of the Code at the time when any unitrust paymentis to be distributed to it then the Trustee shall distribute that unitrust payment to one or more organizations describedin sectsect 170(c) and 2055(a) of the Code as the Trustee shall select and in the proportions as the Trustee shall decidein the Trusteersquos sole discretion The unitrust amount shall be paid in equal quarterly installments at the end of eachcalendar quarter from income and to the extent income is not sufficient from principal Any income of the trust for ataxable year in excess of the unitrust amount shall be added to principal If for any year the net fair market value ofthe trust assets is incorrectly determined then within a reasonable period after the correct value is finally determinedthe Trustee shall pay to the Recipient and the Charitable Recipient (in the case of an undervaluation) or receive fromthe Recipient and the Charitable Recipient (in the case of an overvaluation) an amount equal to the difference betweenthe unitrust amount(s) properly payable and the unitrust amount(s) actually paid





(1) Explanation A trust is not a CRUT if any person has the power to alter the amount to be paid to any named person otherthan an organization described in sect 170(c) if the power would cause any person to be treated as the owner of the trust orany portion thereof if subpart E were applicable to the trust Section 1664ndash3(a)(3)(ii) See Rev Rul 77ndash73 1977ndash1 CB175 A trusteersquos discretionary power exercisable solely by that trustee to allocate the unitrust amount among the membersof a class would cause the trustee to be treated as the owner of all or a portion of the trust under sect 678(a) if the trustee is amember of the class if the trustee may apply trust income or corpus to satisfy the trusteersquos own legal obligation or if thetrustee actually exercises the power to satisfy a support obligation owed by the trustee Therefore if any trustee is given thediscretionary power exercisable solely by that trustee to allocate the unitrust amount among members of a class the trust


instrument must provide that such trustee must be (i) not a member of the recipient class and (ii) prohibited from applyingany part of the unitrust payment in satisfaction of the trusteersquos own legal obligation








The unitrust period is a period of [not more than 20] years unless earlier terminated by the occurrence of [qualifiedcontingency] The first day of the unitrust period shall be the date of my death and the last day of the unitrust periodshall be the day preceding the [ordinal number corresponding to the length of the unitrust period] anniversary of thatdate or if earlier the date on which occurs the [qualified contingency]



(2) Instructions for use Replace paragraph 4 Distribution to Charity of the sample trust with the following paragraphDistribution to Charity At the termination of the unitrust period the Trustee shall distribute all of the then principal andincome of the trust (other than any amount due the Recipient under the terms of this trust) to one or more charitable orga-nizations described in sectsect 170(c) and 2055(a) of the Code as the Recipient shall appoint and direct by specific referenceto this power of appointment by inter vivos or testamentary instrument To the extent the Recipient fails to effectivelyexercise the power of appointment the principal and income not effectively appointed shall be distributed to one or moreorganizations described in sectsect 170(c) and 2055(a) of the Code as the Trustee shall select and in the proportions as theTrustee shall decide in the Trusteersquos sole discretion If an organization fails to qualify as an organization described insectsect 170(c) and 2055(a) of the Code at the time when any principal or income of the trust is to be distributed to it then theTrustee shall distribute the then principal and income to one or more organizations described in sectsect 170(c) and 2055(a)of the Code as the Trustee shall select and in the proportions as the Trustee shall decide in the Trusteersquos sole discretion



(2) Definition of trust income For purposes of the methods described in sect 664(d)(3) trust income generally means incomeas defined under sect 643(b) and the applicable regulations Section 1664ndash3(a)(1)(i)(b)(3) Even if permitted by applicablestate law however trust income of a CRUT that uses the net income method the net income with make-up method or acombination of methods of determining the unitrust amount may not be determined by reference to a fixed percentage ofthe net fair market value of the trust property In addition although certain proceeds from the sale or exchange of assets


must be allocated to principal and not to trust income other such proceeds may be allocated to trust income pursuant to theterms of the governing instrument if not prohibited by applicable local law A discretionary power to make this allocationmay be granted to the trustee under the terms of the governing instrument but only to the extent that the applicable statestatute permits the trustee to make adjustments between income and principal to treat beneficiaries impartially Section1664ndash3(a)(1)(i)(b)(3) A definition of trust income that is consistent with these requirements may but need not be includedin the trust instrument



In each taxable year of the trust during the unitrust period the Trustee shall pay to [permissible recipient] (hereinafterldquothe Recipientrdquo) a unitrust amount equal to the lesser of (a) a fixed percentage amount equal to [a number no less than5 and no more than 50] percent of the net fair market value of the assets of the trust valued as of the valuation date(hereinafter ldquothe fixed percentage amount described in (a) of paragraph 1rdquo) or (b) the trust income for the taxable yearas defined in sect 643(b) of the Code and the applicable regulations The valuation date is the first day of each taxableyear of the trust The unitrust period shall be a period of [a number not more than 20 years] years The first dayof the unitrust period shall be the date of my death and the last day of the unitrust period shall be the day precedingthe [ordinal number corresponding to the length of the unitrust period] anniversary of that date The unitrust amountshall be paid in equal quarterly installments at the end of each calendar quarter from income Any income of the trustfor a taxable year in excess of the unitrust amount shall be added to principal






In each taxable year of the trust during the unitrust period the Trustee shall pay to [permissible recipient] (hereinafterldquothe Recipientrdquo) a unitrust amount equal to the lesser of (a) a fixed percentage amount equal to [a number no less than5 and no more than 50] percent of the net fair market value of the assets of the trust valued as of the valuation date(hereinafter ldquothe fixed percentage amount described in (a) of paragraph 1rdquo) or (b) the trust income for the taxable yearas defined in sect 643(b) of the Code and the applicable regulations The unitrust amount for a taxable year shall alsoinclude any amount of trust income for the year that is in excess of [the fixed percentage amount determined under(a) of this paragraph for the year] but only to the extent that the aggregate of the amounts paid to the Recipient inprior years was less than the aggregate of the amounts determined for all prior years under (a) of this paragraph Thevaluation date is the first day of each taxable year of the trust The unitrust period shall be a period of [a numbernot more than 20 years] years The first day of the unitrust period shall be the date of my death and the last day ofthe unitrust period shall be the day preceding the [ordinal number corresponding to the length of the unitrust period]anniversary of that date The unitrust amount shall be paid in equal quarterly installments at the end of each calendarquarter from income Any income of the trust for a taxable year in excess of the unitrust amount shall be added toprincipal

(c) Replace paragraph 3 Proration of Unitrust Amount of the sample trust with the following paragraph


Proration of Unitrust Amount For a short taxable year and for the taxable year during which the unitrust periodends the Trustee shall prorate on a daily basis the fixed percentage amount described in (a) of paragraph 1 In such ayear this prorated fixed percentage amount shall be used in place of the fixed percentage amount described in (a) ofparagraph 1 to determine the unitrust amount payable for that year






(i) Unitrust amount determined by net income method In each taxable year of the trust during the unitrust period theTrustee shall pay to [permissible recipient] (hereinafter ldquothe Recipientrdquo) a unitrust amount equal to the lesser of (a) afixed percentage amount equal to [a number no less than 5 and no more than 50] percent of the net fair market valueof the assets of the trust valued as of the valuation date (hereinafter ldquothe fixed percentage amount described in (a)of paragraph 1(i)rdquo) or (b) the trust income for the taxable year as defined in sect 643(b) of the Code and the applicableregulations The unitrust amount shall be paid in equal quarterly installments at the end of each calendar quarter fromincome Any income of the trust for a taxable year in excess of the unitrust amount shall be added to principal

(ii) Conversion to fixed percentage method of determining unitrust amount Notwithstanding paragraph 1(i) upon theoccurrence of [permissible triggering event as described in sect 1664ndash3(a)(1)(i)(c) and (d) of the Income Tax Regula-tions] (hereinafter ldquothe triggering eventrdquo) and effective as of the first day of the taxable year that immediately followsthe triggering event (hereinafter ldquothe effective date of the triggering eventrdquo) the Trustee shall pay to the Recipient ineach remaining taxable year of the trust during the unitrust period a unitrust amount equal to [same percentage usedin (a) of paragraph 1(i)] percent of the net fair market value of the trust assets as of the valuation date Beginning onthe effective date of the triggering event the Trustee shall no longer pay the amount equal to the lesser of (a) or (b) inparagraph 1(i) The unitrust amount shall be paid in equal quarterly installments at the end of each calendar quarterfrom income and to the extent income is not sufficient from principal Any income of the trust for a taxable year inexcess of the unitrust amount shall be added to principal

(iii) In general The unitrust period shall be a period of [a number not more than 20] years The first day of the unitrustperiod shall be the date of my death and the last day of the unitrust period shall be the day preceding the [ordinalnumber corresponding to the length of the unitrust period] anniversary of that date The valuation date is the first dayof each taxable year of the trust If for any year the net fair market value of the trust assets is incorrectly determinedthen within a reasonable period after the correct value is finally determined the Trustee shall pay to the Recipient (inthe case of an undervaluation) or receive from the Recipient (in the case of an overvaluation) an amount equal to thedifference between the unitrust amount(s) properly payable and the unitrust amount(s) actually paid


(i) Proration in years preceding the effective date of triggering event For a short taxable year before the effective dateof the triggering event which may include the taxable year during which the unitrust period ends the Trustee shallprorate on a daily basis the fixed percentage amount described in (a) of paragraph 1(i) In such a year this prorated


fixed percentage amount shall be used in place of the fixed percentage amount described in (a) of paragraph 1(i)to determine the unitrust amount payable for that year





(i) Unitrust amount determined by net income with make-up method In each taxable year of the trust during the unitrustperiod the Trustee shall pay to [permissible recipient] (hereinafter ldquothe Recipientrdquo) a unitrust amount equal to thelesser of (a) a fixed percentage amount equal to [a number no less than 5 and no more than 50] percent of the netfair market value of the assets of the trust valued as of the valuation date (hereinafter ldquothe fixed percentage amountdescribed in (a) of paragraph 1(i)rdquo) or (b) the trust income for the taxable year as defined in sect 643(b) of the Code andthe applicable regulations The unitrust amount for a taxable year shall also include any amount of trust income forthe year that is in excess of [the fixed percentage amount determined under (a) of paragraph 1(i) for the year] butonly to the extent that the aggregate of the amounts paid to the Recipient in prior years was less than the aggregateof the amounts determined for all prior years under (a) of paragraph 1(i) The unitrust amount shall be paid in equalquarterly installments at the end of each calendar quarter from income Any income of the trust for a taxable year inexcess of the unitrust amount shall be added to principal

(ii) Conversion to fixed percentage method of determining unitrust amount Notwithstanding paragraph 1(i) upon theoccurrence of [permissible triggering event as described in sect 1664ndash3(a)(1)(i)(c) and (d) of the Income Tax Regula-tions] (hereinafter ldquothe triggering eventrdquo) and effective as of the first day of the taxable year that immediately followsthe triggering event (hereinafter ldquothe effective date of the triggering eventrdquo) the Trustee shall pay to the Recipient ineach remaining taxable year of the trust during the unitrust period a unitrust amount equal to [same percentage usedin (a) of paragraph 1(i)] percent of the net fair market value of the trust assets as of the valuation date Beginning onthe effective date of the triggering event the Trustee shall no longer pay the amount equal to the lesser of (a) or (b) inparagraph 1(i) and shall not pay any amount of trust income described in the second sentence of paragraph 1(i) Theunitrust amount shall be paid in equal quarterly installments at the end of each calendar quarter from income and tothe extent income is not sufficient from principal Any income of the trust for a taxable year in excess of the unitrustamount shall be added to principal



(i) Proration in years preceding the effective date of triggering event For a short taxable year before the effective dateof the triggering event which may include the taxable year during which the unitrust period ends the Trustee shallprorate on a daily basis the fixed percentage amount described in (a) of paragraph 1(i) In such a year this proratedfixed percentage amount shall be used in place of the fixed percentage amount described in (a) of paragraph 1(i) todetermine the unitrust amount payable for that year







SECTION 1 PURPOSE

This revenue procedure contains an annotated sample declaration of trust and alternate provisions that meet the requirements ofsect 664(d)(2) and (d)(3) of the Internal Revenue Code for a testamentary charitable remainder unitrust (CRUT) providing for unitrustpayments payable consecutively for two measuring lives followed by the distribution of trust assets to a charitable remainderman


Previously the Internal Revenue Service issued sample trust instruments for certain types of CRUTs The Service is updatingthe previously issued samples and issuing new samples for additional types of CRUTs annotations and alternate sample provisionsare included as further guidance In addition to the sample trust instrument included in this revenue procedure for a testamentaryCRUT providing for unitrust payments payable consecutively for two measuring lives samples are provided in other separate revenueprocedures for





6 of Rev Proc 90ndash30 and section 7 of Rev Proc 90ndash31)(f) a testamentary CRUT providing for unitrust payments for a term of years (see Rev Proc 2005ndash57) and(g) a testamentary CRUT providing for unitrust payments payable concurrently and consecutively for two measuring lives (see



Section 4 of this revenue procedure provides a sample declaration of trust for a testamentary CRUT with consecutive interests fortwo measuring lives that is created by an individual who is a citizen or resident of the United States Section 5 of this revenue procedureprovides annotations to the provisions of the sample trust Section 6 of this revenue procedure provides samples of certain alternateprovisions concerning (01) the payment of part of the unitrust amount to an organization described in sect 170(c) (02) a qualifiedcontingency (03) the last unitrust payments to the recipients (04) a power of appointment to designate the charitable remainderman(05) the net income method of calculating the unitrust amount (06) the net income with make-up method of calculating the unitrustamount and (07) a combination of methods for calculating the unitrust amount

For transfers to a qualifying CRUT as defined in sect 664(d)(2) and if applicable sect 664(d)(3) the remainder interest will be deductibleby a citizen or resident of the United States under sect 2055(e)(2)(A) for estate tax purposes if the other requirements of sect 2055(e)(2)(A)(that is the requirements not relating to the provisions of the governing instrument) also are met The Service will recognize a trustas a qualified CRUT meeting all of the requirements of sect 664(d)(2) and if applicable sect 664(d)(3) if the trust operates in a mannerconsistent with the terms of the trust instrument if the trust is a valid trust under applicable local law and if the trust instrument (i) issubstantially similar to the sample in section 4 of this revenue procedure or (ii) properly integrates one or more alternate provisionsfrom section 6 of this revenue procedure into a document substantially similar to the sample in section 4 of this revenue procedureA trust that contains substantive provisions in addition to those provided in section 4 of this revenue procedure (other than properlyintegrated alternate provisions from section 6 of this revenue procedure or provisions necessary to establish a valid trust under appli-cable local law that are not inconsistent with the applicable federal tax requirements) or that omits any of the provisions of section4 of this revenue procedure (unless an alternate provision from section 6 of this revenue procedure is properly integrated) will notnecessarily be disqualified but neither will that trust be assured of qualification under the provisions of this revenue procedure TheService generally will not issue a letter ruling on whether a testamentary trust created by an individual and with consecutive interestsfor two measuring lives qualifies as a CRUT The Service however generally will issue letter rulings on the effect of substantive trustprovisions other than those contained in sections 4 and 6 of this revenue procedure on the qualification of a trust as a CRUT


SECTION 4 SAMPLE TESTAMENTARY CHARITABLE REMAINDER UNITRUST mdash TWO LIVESCONSECUTIVE INTERESTS



recipient] (hereinafter ldquothe Initial Recipientrdquo) until the Initial Recipientrsquos death and thereafter to [permissible recipient] (hereinafterldquothe Successor Recipientrdquo) a unitrust amount equal to [a number no less than 5 and no more than 50] percent of the net fair marketvalue of the assets of the trust valued as of the first day of each taxable year of the trust (hereinafter ldquothe valuation daterdquo) The firstday of the unitrust period shall be the date of my death and the last day of the unitrust period shall be the date of the death of thesurvivor of the Initial Recipient and the Successor Recipient The unitrust amount shall be paid in equal quarterly installments at theend of each calendar quarter from income and to the extent income is not sufficient from principal Any income of the trust for ataxable year in excess of the unitrust amount shall be added to principal If for any year the net fair market value of the trust assets isincorrectly determined then within a reasonable period after the correct value is finally determined the Trustee shall pay to the InitialRecipient andor the Successor Recipient (in the case of an undervaluation) or receive from the Initial Recipient andor the SuccessorRecipient (in the case of an overvaluation) an amount equal to the difference between the unitrust amount(s) properly payable and theunitrust amount(s) actually paid

2 Deferral Provision The obligation to pay the unitrust amount shall commence with the date of my death but payment of theunitrust amount may be deferred from this date until the end of the taxable year in which the trust is completely funded Within areasonable time after the end of the taxable year in which the trust is completely funded the Trustee must pay to the Initial Recipientandor the Successor Recipient (in the case of an underpayment) or receive from the Initial Recipient andor the Successor Recipient(in the case of an overpayment) the difference between any unitrust amounts actually paid plus interest and the unitrust amountspayable plus interest The interest shall be computed for any period at the rate of interest compounded annually that the federalincome tax regulations under sect 664 of the Code prescribe for this computation

3 Proration of Unitrust Amount For a short taxable year and for the taxable year during which the unitrust period ends the Trusteeshall prorate on a daily basis the unitrust amount described in paragraph 1 If the Successor Recipient survives the Initial Recipientthe Trustee shall prorate on a daily basis the next regular unitrust payment due after the death of the Initial Recipient between theestate of the Initial Recipient and the Successor Recipient

4 Distribution to Charity At the termination of the unitrust period the Trustee shall distribute all of the then principal and incomeof the trust (other than any amount due the Initial Recipient andor the Successor Recipient under the terms of this trust) to [desig-nated remainderman] (hereinafter ldquothe Charitable Organizationrdquo) If the Charitable Organization is not an organization described insectsect 170(c) and 2055(a) of the Code at the time when any principal or income of the trust is to be distributed to it then the Trustee shalldistribute the then principal and income to one or more organizations described in sectsect 170(c) and 2055(a) of the Code as the Trusteeshall select and in the proportions as the Trustee shall decide in the Trusteersquos sole discretion








12 Definition of Initial Recipient and Successor Recipient References to the Initial Recipient andor the Successor Recipientin this trust instrument shall be deemed to include the estate of the Initial Recipient andor the Successor Recipient with regard to


all provisions in this trust instrument that describe amounts payable to andor due from the Initial Recipient andor the SuccessorRecipient The prior sentence shall not apply to the determination of the last day of the unitrust period

SECTION 5 ANNOTATIONS REGARDING SAMPLE TESTAMENTARY CHARITABLE REMAINDERUNITRUST mdash TWO LIVES CONSECUTIVE INTERESTS










(5) Rules applicable to valuation Paragraph 1 Payment of Unitrust Amount of the sample trust specifies that the net fairmarket value of trust assets is to be valued as of the first day of each taxable year of the trust However the value of thetrust assets may be determined on any one date during the taxable year of the trust or by taking the average of valuationsmade on more than one date during the taxable year of the trust so long as the same valuation date or dates and the samevaluation methods are used each year If the governing instrument does not specify the valuation date or dates the trusteemust select the date or dates and indicate the selection on the first Form 5227 ldquoSplit-Interest Trust Information Returnrdquo


that the trust must file Section 1664ndash3(a)(1)(iv) Note that if the valuation date is a date other than the first day of eachtaxable year of the trust it may be necessary to modify the provisions in the sample trust regarding (i) the timing of thepayment of the unitrust amount and (ii) the proration of the unitrust amount in a short taxable year and the last taxable yearof the unitrust period See sect 1664ndash3(a)(1)(v)






(2) Treatment of distributions For the proper treatment of distributions to a charitable remainder trust or to a recipient during theperiod of administration of an estate or settlement of a trust that is not a charitable remainder trust see sect 1664ndash1(a)(5)(iii)







(3) Designated remainderman Any named charitable remainderman must be an organization described in sectsect 170(c) and2055(a) at the time of the transfer to the CRUT See sect 664(d)(2)(C) The trust instrument may restrict the charitable re-mainderman to an organization described in sectsect 170(c) and 2055(a) but grant to a trustee or other person the power todesignate the actual charitable remainderman See section 604 of this revenue procedure for an alternate provision inwhich a recipient is granted a power of appointment to designate the charitable remainderman


(5) Alternative remaindermen The trust instrument of a CRUT must provide a means for selecting alternative charitable re-maindermen in the event any designated organization is not qualified at the time any payments are to be made to it from the


trust Section 1664ndash3(a)(6)(iv) This requirement is satisfied in the sample trust by conferring the power upon the trusteeto designate an alternative charitable remainderman Note that the donor may designate one or more alternative charitableremaindermen in the trust instrument however the trust instrument must continue to provide a means for selecting an al-ternative charitable remainderman if any designated organization is not qualified at the time payments are to be made to itfrom the trust










SECTION 6 ALTERNATE PROVISIONS FOR SAMPLE TESTAMENTARY CHARITABLE REMAINDERUNITRUST mdash TWO LIVES CONSECUTIVE INTERESTS


(1) Explanation An organization described in sect 170(c) may receive part but not all of any unitrust amount Section664(d)(2)(A) If an estate tax charitable deduction is sought for the present value of the unitrust interest passing to acharitable organization the trust instrument must contain additional provisions First the trust instrument must specify theportion of each unitrust payment that is payable to the noncharitable recipients and to the charitable organization describedin sectsect 170(c) and 2055(a) Second the trust instrument must contain a means for selecting an alternative qualified charitableorganization if the designated organization is not a qualified organization at the time when any unitrust amount is to bepaid to it Third the trust instrument must contain prohibitions against investments that jeopardize the exempt purpose ofthe trust within the meaning of sect 4944 as modified by sect 4947(a)(2)(A) and against retaining any excess business holdingswithin the meaning of sect 4943 as modified by sect 4947(a)(2)(A)


Payment of Unitrust Amount The unitrust amount is equal to [a number no less than 5 and no more than 50] percent ofthe net fair market value of the assets of the trust valued as of the first day of each taxable year of the trust (hereinafter


ldquothe valuation daterdquo) In each taxable year of the trust during the unitrust period the Trustee shall pay [the percentageof the unitrust amount payable to the noncharitable recipient] percent of the unitrust amount to [permissible recip-ient] (hereinafter ldquothe Initial Recipientrdquo) until the Initial Recipientrsquos death and thereafter to [permissible recipient](hereinafter ldquothe Successor Recipientrdquo) In each taxable year of the trust during the unitrust period the Trustee shallpay [the percentage of unitrust amount payable to the charitable recipient] percent of the unitrust amount to [an or-ganization described in sectsect 170(c) and 2055(a) of the Code] (hereinafter ldquothe Charitable Recipientrdquo) The first day ofthe unitrust period shall be the date of my death and the last day of the unitrust period shall be the date of the deathof the survivor of the Initial Recipient and the Successor Recipient If the Charitable Recipient is not an organizationdescribed in sectsect 170(c) and 2055(a) of the Code at the time when any unitrust payment is to be distributed to it thenthe Trustee shall distribute that unitrust payment to one or more organizations described in sectsect 170(c) and 2055(a) ofthe Code as the Trustee shall select and in the proportions as the Trustee shall decide in the Trusteersquos sole discretionThe unitrust amount shall be paid in equal quarterly installments at the end of each calendar quarter from incomeand to the extent income is not sufficient from principal Any income of the trust for a taxable year in excess of theunitrust amount shall be added to principal If for any year the net fair market value of the trust assets is incorrectlydetermined then within a reasonable period after the correct value is finally determined the Trustee shall pay tothe Initial Recipient andor the Successor Recipient and the Charitable Recipient (in the case of an undervaluation)or receive from the Initial Recipient andor the Successor Recipient and the Charitable Recipient (in the case of anovervaluation) an amount equal to the difference between the unitrust amount(s) properly payable and the unitrustamount(s) actually paid

(b) Replace each reference to ldquothe Initial Recipient andor Successor Recipientrdquo in paragraph 2 Deferral Provision of thesample trust with a reference to ldquothe Initial Recipient andor Successor Recipient and the Charitable Recipientrdquo

(c) Replace the first parenthetical in paragraph 4 Distribution to Charity of the sample trust with the following parenthetical(other than any amount due the Initial Recipient andor the Successor Recipient and the Charitable Recipient underthe terms of this trust)





The first day of the unitrust period shall be the date of my death and the last day of the unitrust period shall be the dateof the death of the survivor of the Initial Recipient and the Successor Recipient or if earlier the date on which occursthe [qualified contingency]

03 Last Unitrust Payment to the Recipients

(1) Explanation As an alternative to prorating the unitrust amount in the taxable year of the initial recipientrsquos death the obli-gation to pay the unitrust amount to the initial recipient may terminate with the last regular payment preceding the initialrecipientrsquos death Similarly as an alternative to prorating the unitrust amount in the taxable year of the successor recipi-entrsquos death the obligation to pay the unitrust amount may terminate with the last regular payment preceding the successorrecipientrsquos death However the fact that a recipient may not receive a final prorated payment shall not be taken into accountfor purposes of determining the present value of the remainder interest Section 1664ndash3(a)(5)(i) Note that although theobligation to pay the unitrust amount to a recipient may terminate with the last regular payment preceding that recipientrsquosdeath the trustee must pay a recipientrsquos estate any amounts allocated to the payments payable before the recipientrsquos deaththat are due as a result of an adjustment to the unitrust amount payable for that year as in the case of an undervaluation



Proration of Unitrust Amount For a short taxable year and for the taxable year during which the unitrust period endsthe Trustee shall prorate on a daily basis the unitrust amount described in paragraph 1 If the Successor Recipientsurvives the Initial Recipient the obligation of the Trustee to pay the unitrust amount to the Initial Recipient shall


terminate with the last regular quarterly installment preceding the death of the Initial Recipient and the entire amountof the first regular quarterly installment after the death of the Initial Recipient shall be paid to the Successor Recipient


Proration of Unitrust Amount For a short taxable year the Trustee shall prorate on a daily basis the unitrust amountdescribed in paragraph 1 If the Successor Recipient survives the Initial Recipient the Trustee shall prorate on adaily basis the next regular unitrust payment due after the death of the Initial Recipient between the estate of theInitial Recipient and the Successor Recipient In the taxable year of the trust during which the unitrust period endsthe obligation of the Trustee to pay the unitrust amount shall terminate with the last regular quarterly installmentpreceding the death of the survivor of the Initial Recipient and the Successor Recipient

(c) To add an alternate provision terminating the payment of the unitrust amount to the initial recipient with the last regularpayment preceding his or her death and terminating the payment of the unitrust amount with the last regular paymentpreceding the termination of the unitrust period replace paragraph 3 Proration of Unitrust Amount of the sample trustwith the following paragraph

Proration of Unitrust Amount For a short taxable year the Trustee shall prorate on a daily basis the unitrust amountdescribed in paragraph 1 If the Successor Recipient survives the Initial Recipient the obligation of the Trustee topay the unitrust amount to the Initial Recipient shall terminate with the last regular quarterly installment precedingthe death of the Initial Recipient and the entire amount of the first regular quarterly installment after the death of theInitial Recipient shall be paid to the Successor Recipient In the taxable year of the trust during which the unitrustperiod ends the obligation of the Trustee to pay the unitrust amount shall terminate with the last regular quarterlyinstallment preceding the death of the survivor of the Initial Recipient and the Successor Recipient



(2) Instructions for use Replace paragraph 4 Distribution to Charity of the sample trust with the following paragraphDistribution to Charity At the termination of the unitrust period the Trustee shall distribute all of the then principal andincome of the trust (other than any amount due the Initial Recipient andor the Successor Recipient under the terms ofthis trust) to one or more charitable organizations described in sectsect 170(c) and 2055(a) of the Code as [one of the namedpermissible recipients] shall appoint and direct by specific reference to this power of appointment by inter vivos ortestamentary instrument To the extent this power of appointment is not effectively exercised the principal and incomenot effectively appointed shall be distributed to one or more organizations described in sectsect 170(c) and 2055(a) of theCode as the Trustee shall select and in the proportions as the Trustee shall decide in the Trusteersquos sole discretion Ifan organization fails to qualify as an organization described in sectsect 170(c) and 2055(a) of the Code at the time when anyprincipal or income of the trust is to be distributed to it then the Trustee shall distribute the then principal and incometo one or more organizations described in sectsect 170(c) and 2055(a) of the Code as the Trustee shall select and in theproportions as the Trustee shall decide in the Trusteersquos sole discretion



(2) Definition of trust income For purposes of the methods described in sect 664(d)(3) trust income generally means incomeas defined under sect 643(b) and the applicable regulations Section 1664ndash3(a)(1)(i)(b)(3) Even if permitted by applicablestate law however trust income of a CRUT that uses the net income method the net income with make-up method or acombination of methods of determining the unitrust amount may not be determined by reference to a fixed percentage ofthe net fair market value of the trust property In addition although certain proceeds from the sale or exchange of assetsmust be allocated to principal and not to trust income other such proceeds may be allocated to trust income pursuant to theterms of the governing instrument if not prohibited by applicable local law A discretionary power to make this allocationmay be granted to the trustee under the terms of the governing instrument but only to the extent that the applicable statestatute permits the trustee to make adjustments between income and principal to treat beneficiaries impartially Section


1664ndash3(a)(1)(i)(b)(3) A definition of trust income that is consistent with these requirements may but need not be includedin the trust instrument



In each taxable year of the trust during the unitrust period the Trustee shall pay to [permissible recipient] (hereinafterldquothe Initial Recipientrdquo) until the Initial Recipientrsquos death and thereafter to [permissible recipient] (hereinafter ldquotheSuccessor Recipientrdquo) a unitrust amount equal to the lesser of (a) a fixed percentage amount equal to [a numberno less than 5 and no more than 50] percent of the net fair market value of the assets of the trust valued as of thevaluation date (hereinafter ldquothe fixed percentage amount described in (a) of paragraph 1rdquo) or (b) the trust income forthe taxable year as defined in sect 643(b) of the Code and the applicable regulations The valuation date is the first dayof each taxable year of the trust The first day of the unitrust period shall be the date of my death and the last day ofthe unitrust period shall be the date of the death of the survivor of the Initial Recipient and the Successor RecipientThe unitrust amount shall be paid in equal quarterly installments at the end of each calendar quarter from incomeAny income of the trust for a taxable year in excess of the unitrust amount shall be added to principal

(c) Replace paragraph 3 Proration of Unitrust Amount of the sample trust with the following paragraphProration of Unitrust Amount For a short taxable year and for the taxable year during which the unitrust periodends the Trustee shall prorate on a daily basis the fixed percentage amount described in (a) of paragraph 1 In sucha year this prorated fixed percentage amount shall be used in place of the fixed percentage amount described in (a)of paragraph 1 to determine the unitrust amount payable for that year If the Successor Recipient survives the InitialRecipient the Trustee shall prorate on a daily basis the next regular unitrust payment due after the death of the InitialRecipient between the estate of the Initial Recipient and the Successor Recipient





In each taxable year of the trust during the unitrust period the Trustee shall pay to [permissible recipient] (hereinafterldquothe Initial Recipientrdquo) until the Initial Recipientrsquos death and thereafter to [permissible recipient] (hereinafter ldquotheSuccessor Recipientrdquo) a unitrust amount equal to the lesser of (a) a fixed percentage amount equal to [a number noless than 5 and no more than 50] percent of the net fair market value of the assets of the trust valued as of the valuationdate (hereinafter ldquothe fixed percentage amount described in (a) of paragraph 1rdquo) or (b) the trust income for the taxableyear as defined in sect 643(b) of the Code and the applicable regulations The unitrust amount for a taxable year shallalso include any amount of trust income for the year that is in excess of [the fixed percentage amount determinedunder (a) of this paragraph for the year] but only to the extent that the aggregate of the amounts paid in prior yearswhether to the Initial Recipient or to the Successor Recipient was less than the aggregate of the amounts determinedfor all prior years under (a) of this paragraph The valuation date is the first day of each taxable year of the trust Thefirst day of the unitrust period shall be the date of my death and the last day of the unitrust period shall be the dateof the death of the survivor of the Initial Recipient and the Successor Recipient The unitrust amount shall be paid inequal quarterly installments at the end of each calendar quarter from income Any income of the trust for a taxableyear in excess of the unitrust amount shall be added to principal

(c) Replace paragraph 3 Proration of Unitrust Amount of the sample trust with the following paragraphProration of Unitrust Amount For a short taxable year and for the taxable year during which the unitrust periodends the Trustee shall prorate on a daily basis the fixed percentage amount described in (a) of paragraph 1 In such


a year this prorated fixed percentage amount shall be used in place of the fixed percentage amount described in (a)of paragraph 1 to determine the unitrust amount payable for that year If the Successor Recipient survives the InitialRecipient the Trustee shall prorate on a daily basis the next regular unitrust payment due after the death of the InitialRecipient between the estate of the Initial Recipient and the Successor Recipient






(i) Unitrust amount determined by net income method In each taxable year of the trust during the unitrust period theTrustee shall pay to [permissible recipient] (hereinafter ldquothe Initial Recipientrdquo) until the Initial Recipientrsquos death andthereafter to [permissible recipient] (hereinafter ldquothe Successor Recipientrdquo) a unitrust amount equal to the lesser of(a) a fixed percentage amount equal to [a number no less than 5 and no more than 50] percent of the net fair marketvalue of the assets of the trust valued as of the valuation date (hereinafter ldquothe fixed percentage amount described in(a) of paragraph 1(i)rdquo) or (b) the trust income for the taxable year as defined in sect 643(b) of the Code and the applicableregulations The unitrust amount shall be paid in equal quarterly installments at the end of each calendar quarter fromincome Any income of the trust for a taxable year in excess of the unitrust amount shall be added to principal

(ii) Conversion to fixed percentage method of determining unitrust amount Notwithstanding paragraph 1(i) upon theoccurrence of [permissible triggering event as described in sect 1664ndash3(a)(1)(i)(c) and (d) of the Income Tax Regula-tions] (hereinafter ldquothe triggering eventrdquo) and effective as of the first day of the taxable year that immediately followsthe triggering event (hereinafter ldquothe effective date of the triggering eventrdquo) in each remaining taxable year of thetrust during the unitrust period the Trustee shall pay to the Initial Recipient until his or her death and thereafter tothe Successor Recipient a unitrust amount equal to [same percentage used in (a) of paragraph 1(i)] percent of the netfair market value of the trust assets as of the valuation date Beginning on the effective date of the triggering eventthe Trustee shall no longer pay the amount equal to the lesser of (a) or (b) in paragraph 1(i) The unitrust amount shallbe paid in equal quarterly installments at the end of each calendar quarter from income and to the extent income isnot sufficient from principal Any income of the trust for a taxable year in excess of the unitrust amount shall beadded to principal

(iii) In general The first day of the unitrust period shall be the date of my death and the last day of the unitrust periodshall be the date of the death of the survivor of the Initial Recipient and the Successor Recipient The valuationdate is the first day of each taxable year of the trust If for any year the net fair market value of the trust assetsis incorrectly determined then within a reasonable period after the correct value is finally determined the Trusteeshall pay to the Initial Recipient andor the Successor Recipient (in the case of an undervaluation) or receive from theInitial Recipient andor the Successor Recipient (in the case of an overvaluation) an amount equal to the differencebetween the unitrust amount(s) properly payable and the unitrust amount(s) actually paid


(i) Proration in years preceding the effective date of triggering event For a short taxable year before the effective dateof the triggering event which may include the taxable year during which the unitrust period ends the Trustee shall


prorate on a daily basis the fixed percentage amount described in (a) of paragraph 1(i) In such a year this proratedfixed percentage amount shall be used in place of the fixed percentage amount described in (a) of paragraph 1(i)to determine the unitrust amount payable for that year






(i) Unitrust amount determined by net income with make-up method In each taxable year of the trust during the unitrustperiod the Trustee shall pay to [permissible recipient] (hereinafter ldquothe Initial Recipientrdquo) until the Initial Recipientrsquosdeath and thereafter to [permissible recipient] (hereinafter ldquothe Successor Recipientrdquo) a unitrust amount equal to thelesser of (a) a fixed percentage amount equal to [a number no less than 5 and no more than 50] percent of the netfair market value of the assets of the trust valued as of the valuation date (hereinafter ldquothe fixed percentage amountdescribed in (a) of paragraph 1(i)rdquo) or (b) the trust income for the taxable year as defined in sect 643(b) of the Code andthe applicable regulations The unitrust amount for a taxable year shall also include any amount of trust income for theyear that is in excess of [the fixed percentage amount determined under (a) of paragraph 1(i) for the year] but onlyto the extent that the aggregate of the amounts paid in prior years whether to the Initial Recipient or to the SuccessorRecipient was less than the aggregate of the amounts determined for all prior years under (a) of paragraph 1(i) Theunitrust amount shall be paid in equal quarterly installments at the end of each calendar quarter from income Anyincome of the trust for a taxable year in excess of the unitrust amount shall be added to principal

(ii) Conversion to fixed percentage method of determining unitrust amount Notwithstanding paragraph 1(i) upon theoccurrence of [permissible triggering event as described in sect 1664ndash3(a)(1)(i)(c) and (d) of the Income Tax Regula-tions] (hereinafter ldquothe triggering eventrdquo) and effective as of the first day of the taxable year that immediately followsthe triggering event (hereinafter ldquothe effective date of the triggering eventrdquo) in each remaining taxable year of thetrust during the unitrust period the Trustee shall pay to the Initial Recipient until his or her death and thereafter tothe Successor Recipient a unitrust amount equal to [same percentage used in (a) of paragraph 1(i)] percent of the netfair market value of the trust assets as of the valuation date Beginning on the effective date of the triggering eventthe Trustee shall no longer pay the amount equal to the lesser of (a) or (b) in paragraph 1(i) and shall not pay anyamount of trust income described in the second sentence of paragraph 1(i) The unitrust amount shall be paid in equalquarterly installments at the end of each calendar quarter from income and to the extent income is not sufficient fromprincipal Any income of the trust for a taxable year in excess of the unitrust amount shall be added to principal






(iii) Proration of unitrust amount between Initial Recipient and Successor Recipient If the Successor Recipient survivesthe Initial Recipient the Trustee shall prorate on a daily basis the next regular unitrust payment due after the death ofthe Initial Recipient between the estate of the Initial Recipient and the Successor Recipient







SECTION 1 PURPOSE

This revenue procedure contains an annotated sample declaration of trust and alternate provisions that meet the requirements ofsect 664(d)(2) and (d)(3) of the Internal Revenue Code for a testamentary charitable remainder unitrust (CRUT) providing for unitrustpayments payable concurrently and consecutively for two measuring lives followed by the distribution of trust assets to a charitableremainderman


Previously the Internal Revenue Service issued sample trust instruments for certain types of CRUTs The Service is updatingthe previously issued samples and issuing new samples for additional types of CRUTs annotations and alternate sample provisionsare included as further guidance In addition to the sample trust instrument included in this revenue procedure for a testamentaryCRUT providing for unitrust payments payable concurrently and consecutively for two measuring lives samples are provided inother separate revenue procedures for





6 of Rev Proc 90ndash30 and section 7 of Rev Proc 90ndash31)(f) a testamentary CRUT providing for unitrust payments for a term of years (see Rev Proc 2005ndash57) and(g) a testamentary CRUT providing for unitrust payments payable consecutively for two measuring lives (see Rev Proc

2005ndash58 superseding section 7 of Rev Proc 90ndash30 and section 8 of Rev Proc 90ndash31)


Section 4 of this revenue procedure provides a sample declaration of trust for a testamentary CRUT having concurrent and consec-utive unitrust interests for two measuring lives that is created by an individual who is a citizen or resident of the United States Section5 of this revenue procedure provides annotations to the provisions of the sample trust Section 6 of this revenue procedure providessamples of certain alternate provisions concerning (01) the payment of part of the unitrust amount to an organization described insect 170(c) (02) a qualified contingency (03) the last unitrust payments to the recipients (04) a power of appointment to designate thecharitable remainderman (05) the net income method of calculating the unitrust amount (06) the net income with make-up methodof calculating the unitrust amount and (07) a combination of methods for calculating the unitrust amount

For transfers to a qualifying CRUT as defined in sect 664(d)(2) and if applicable sect 664(d)(3) the remainder interest will be deductibleby a citizen or resident of the United States under sect 2055(e)(2)(A) for estate tax purposes if the other requirements of sect 2055(e)(2)(A)(that is the requirements not relating to the provisions of the governing instrument) also are met The Service will recognize a trust


as a qualified CRUT meeting all of the requirements of sect 664(d)(2) and if applicable sect 664(d)(3) if the trust operates in a mannerconsistent with the terms of the trust instrument if the trust is a valid trust under applicable local law and if the trust instrument (i) issubstantially similar to the sample in section 4 of this revenue procedure or (ii) properly integrates one or more alternate provisionsfrom section 6 of this revenue procedure into a document substantially similar to the sample in section 4 of this revenue procedureA trust that contains substantive provisions in addition to those provided in section 4 of this revenue procedure (other than properlyintegrated alternate provisions from section 6 of this revenue procedure or provisions necessary to establish a valid trust under appli-cable local law that are not inconsistent with the applicable federal tax requirements) or that omits any of the provisions of section4 of this revenue procedure (unless an alternate provision from section 6 of this revenue procedure is properly integrated) will notnecessarily be disqualified but neither will that trust be assured of qualification under the provisions of this revenue procedure TheService generally will not issue a letter ruling on whether a testamentary trust created by an individual and having concurrent andconsecutive unitrust interests for two measuring lives qualifies as a CRUT The Service however generally will issue letter rulings onthe effect of substantive trust provisions other than those contained in sections 4 and 6 of this revenue procedure on the qualificationof a trust as a CRUT

SECTION 4 SAMPLE TESTAMENTARY CHARITABLE REMAINDER UNITRUST mdash TWO LIVESCONCURRENT AND CONSECUTIVE INTERESTS



recipient] and to [permissible recipient] (hereinafter ldquothe Recipientsrdquo) in equal shares during their joint lives a unitrust amount equalto [a number no less than 5 and no more than 50] percent of the net fair market value of the assets of the trust valued as of thefirst day of each taxable year of the trust (hereinafter ldquothe valuation daterdquo) and upon the death of one (hereinafter ldquothe PredeceasingRecipientrdquo) the Trustee shall pay the entire unitrust amount to the survivor (hereinafter ldquothe Survivor Recipientrdquo) The first day of theunitrust period shall be the date of my death and the last day of the unitrust period shall be the date of the Survivor Recipientrsquos deathThe unitrust amount shall be paid in equal quarterly installments at the end of each calendar quarter from income and to the extentincome is not sufficient from principal Any income of the trust for a taxable year in excess of the unitrust amount shall be added toprincipal If for any year the net fair market value of the trust assets is incorrectly determined then within a reasonable period afterthe correct value is finally determined the Trustee shall pay to the Predeceasing Recipient andor the Survivor Recipient (in the caseof an undervaluation) or receive from the Predeceasing Recipient andor the Survivor Recipient (in the case of an overvaluation) anamount equal to the difference between the unitrust amount(s) properly payable and the unitrust amount(s) actually paid

2 Deferral Provision The obligation to pay the unitrust amount shall commence with the date of my death but payment of theunitrust amount may be deferred from this date until the end of the taxable year in which the trust is completely funded Within areasonable time after the end of the taxable year in which the trust is completely funded the Trustee must pay to the Predeceasing Re-cipient andor the Survivor Recipient (in the case of an underpayment) or receive from the Predeceasing Recipient andor the SurvivorRecipient (in the case of an overpayment) the difference between any unitrust amounts actually paid plus interest and the unitrustamounts payable plus interest The interest shall be computed for any period at the rate of interest compounded annually that thefederal income tax regulations under sect 664 of the Code prescribe for this computation

3 Proration of Unitrust Amount For a short taxable year and for the taxable year during which the unitrust period ends the Trusteeshall prorate on a daily basis the unitrust amount described in paragraph 1 Upon the death of the Predeceasing Recipient the Trusteeshall prorate on a daily basis the next regular unitrust payment due after the death of the Predeceasing Recipient between the estate ofthe Predeceasing Recipient and the Survivor Recipient

4 Distribution to Charity At the termination of the unitrust period the Trustee shall distribute all of the then principal and incomeof the trust (other than any amount due the Predeceasing Recipient andor the Survivor Recipient under the terms of this trust) to [des-ignated remainderman] (hereinafter ldquothe Charitable Organizationrdquo) If the Charitable Organization is not an organization described insectsect 170(c) and 2055(a) of the Code at the time when any principal or income of the trust is to be distributed to it then the Trustee shalldistribute the then principal and income to one or more organizations described in sectsect 170(c) and 2055(a) of the Code as the Trusteeshall select and in the proportions as the Trustee shall decide in the Trusteersquos sole discretion










SECTION 5 ANNOTATIONS REGARDING SAMPLE TESTAMENTARY CHARITABLE REMAINDERUNITRUST mdash TWO LIVES CONCURRENT AND CONSECUTIVE INTERESTS








(3) Division of unitrust amount between recipients The sample trust provides that while both recipients are alive they willshare the unitrust amount equally and upon the death of the predeceasing recipient the survivor recipient will receive all


of the unitrust amount subject to any proration in paragraph 3 However the unitrust amount may be divided other thanequally during the joint lives of the recipients In addition the share of the predeceasing recipient may be made payable toan organization described in sect 170(c) for the rest of the survivor recipientrsquos life









(2) Treatment of distributions For the proper treatment of distributions to a charitable remainder trust or to the recipientsduring the period of administration of an estate or settlement of a trust that is not a charitable remainder trust seesect 1664ndash1(a)(5)(iii)



















(3) Trust to continue in existence for benefit of charity The governing instrument requirements of sect 508(e) must be includedin the trust instrument if after the termination of the unitrust period (i) the trust instrument provides that the trust shallcontinue in existence for the benefit of the charitable remainderman and as a result the trust will become subject to the


provisions of sect 4947(a)(1) and (ii) the trust will be treated as a private foundation within the meaning of sect 509(a) as mod-ified by sect 4947(a)(1) Except as provided in paragraph 7 of the sample trust the trust instrument may limit the applicationof the provisions of sect 508(e) to the period after the termination of the unitrust period when the trust continues in existencefor the benefit of the charitable remainderman

SECTION 6 ALTERNATE PROVISIONS FOR SAMPLE TESTAMENTARY CHARITABLE REMAINDERUNITRUST mdash TWO LIVES CONCURRENT AND CONSECUTIVE INTERESTS




Payment of Unitrust Amount The unitrust amount is equal to [a number no less than 5 and no more than 50] percent ofthe net fair market value of the assets of the trust valued as of the first day of each taxable year of the trust (hereinafterldquothe valuation daterdquo) In each taxable year of the trust during the unitrust period the Trustee shall pay [the percentageof the unitrust amount payable to the noncharitable recipient] percent of the unitrust amount to [permissible recipient]and [permissible recipient] (hereinafter ldquothe Recipientsrdquo) in equal shares during their joint lives and upon the deathof one (hereinafter ldquothe Predeceasing Recipientrdquo) the Trustee shall pay that entire percentage of the unitrust amountto the survivor (hereinafter ldquothe Survivor Recipientrdquo) In each taxable year of the trust during the unitrust periodthe Trustee shall pay [the percentage of unitrust amount payable to the charitable recipient] percent of the unitrustamount to [an organization described in sectsect 170(c) and 2055(a) of the Code] (hereinafter ldquothe Charitable Recipientrdquo)The first day of the unitrust period shall be the date of my death and the last day of the unitrust period shall be thedate of the Survivor Recipientrsquos death If the Charitable Recipient is not an organization described in sectsect 170(c) and2055(a) of the Code at the time when any unitrust payment is to be distributed to it then the Trustee shall distributethat unitrust payment to one or more organizations described in sectsect 170(c) and 2055(a) of the Code as the Trusteeshall select and in the proportions as the Trustee shall decide in the Trusteersquos sole discretion The unitrust amountshall be paid in equal quarterly installments at the end of each calendar quarter from income and to the extent incomeis not sufficient from principal Any income of the trust for a taxable year in excess of the unitrust amount shall beadded to principal If for any year the net fair market value of the trust assets is incorrectly determined then withina reasonable period after the correct value is finally determined the Trustee shall pay to the Predeceasing Recipientandor the Survivor Recipient and the Charitable Recipient (in the case of an undervaluation) or receive from thePredeceasing Recipient andor the Survivor Recipient and the Charitable Recipient (in the case of an overvaluation)an amount equal to the difference between the unitrust amount(s) properly payable and the unitrust amount(s) actuallypaid

(b) Replace each reference to ldquothe Predeceasing Recipient andor Survivor Recipientrdquo in paragraph 2 Deferral Provision ofthe sample trust with a reference to ldquothe Predeceasing Recipient andor Survivor Recipient and the Charitable Recipientrdquo

(c) Replace the first parenthetical in paragraph 4 Distribution to Charity of the sample trust with the following parenthetical(other than any amount due the Predeceasing Recipient andor the Survivor Recipient and the Charitable Recipientunder the terms of this trust)






The first day of the unitrust period shall be the date of my death and the last day of the unitrust period shall be the dateof the Survivor Recipientrsquos death or if earlier the date on which occurs the [qualified contingency]


(1) Explanation As an alternative to prorating the unitrust amount in the taxable year of the predeceasing recipientrsquos deaththe obligation to pay the predeceasing recipientrsquos share of the unitrust amount may terminate with the last regular paymentpreceding the predeceasing recipientrsquos death Similarly as an alternative to prorating the unitrust amount in the taxableyear of the survivor recipientrsquos death the obligation to pay the unitrust amount may terminate with the last regular paymentpreceding the survivor recipientrsquos death However the fact that a recipient may not receive a final prorated payment shallnot be taken into account for purposes of determining the present value of the remainder interest Section 1664ndash3(a)(5)(i)Note that although the obligation to pay the unitrust amount or in the case of the predeceasing recipient a share of theunitrust amount to a recipient may terminate with the last regular payment preceding that recipientrsquos death the trusteemust pay a recipientrsquos estate any amounts allocated to the payments payable before the recipientrsquos death that are due as aresult of an adjustment to the unitrust amount payable for that year as in the case of an undervaluation



Proration of Unitrust Amount For a short taxable year and for the taxable year during which the unitrust periodends the Trustee shall prorate on a daily basis the unitrust amount described in paragraph 1 Upon the death ofthe Predeceasing Recipient the obligation of the Trustee to pay a share of the unitrust amount to the PredeceasingRecipient shall terminate with the last regular quarterly installment preceding the death of the Predeceasing Recipientand the Predeceasing Recipientrsquos share of the unitrust amount shall thereafter be added to and paid as part of the shareof the Survivor Recipient


Proration of Unitrust Amount For a short taxable year the Trustee shall prorate on a daily basis the unitrust amountdescribed in paragraph 1 Upon the death of the Predeceasing Recipient the Trustee shall prorate on a daily basis thenext regular unitrust payment due after the death of the Predeceasing Recipient between the estate of the PredeceasingRecipient and the Survivor Recipient In the taxable year of the trust during which the unitrust period ends the obli-gation of the Trustee to pay the unitrust amount shall terminate with the last regular quarterly installment precedingthe death of the Survivor Recipient

(c) To add an alternate provision terminating the payment of the predeceasing recipientrsquos share of the unitrust amount withthe last regular payment preceding his or her death and terminating the payment of the unitrust amount with the lastregular payment preceding the termination of the unitrust period replace paragraph 3 Proration of Unitrust Amount ofthe sample trust with the following paragraph

Proration of Unitrust Amount For a short taxable year the Trustee shall prorate on a daily basis the unitrust amountdescribed in paragraph 1 Upon the death of the Predeceasing Recipient the obligation of the Trustee to pay a share ofthe unitrust amount to the Predeceasing Recipient shall terminate with the last regular quarterly installment precedingthe death of the Predeceasing Recipient and the Predeceasing Recipientrsquos share of the unitrust amount shall thereafterbe added to and paid as part of the share of the Survivor Recipient In the taxable year of the trust during which theunitrust period ends the obligation of the Trustee to pay the unitrust amount shall terminate with the last regularquarterly installment preceding the death of the Survivor Recipient



(2) Instructions for use Replace paragraph 4 Distribution to Charity of the sample trust with the following paragraphDistribution to Charity At the termination of the unitrust period the Trustee shall distribute all of the then principaland income of the trust (other than any amount due the Predeceasing Recipient andor the Survivor Recipient under theterms of this trust) to one or more charitable organizations described in sectsect 170(c) and 2055(a) of the Code as [one ofthe named permissible recipients] shall appoint and direct by specific reference to this power of appointment by intervivos or testamentary instrument To the extent this power of appointment is not effectively exercised the principal and


income not effectively appointed shall be distributed to one or more organizations described in sectsect 170(c) and 2055(a) ofthe Code as the Trustee shall select and in the proportions as the Trustee shall decide in the Trusteersquos sole discretionIf an organization fails to qualify as an organization described in sectsect 170(c) and 2055(a) of the Code at the time whenany principal or income of the trust is to be distributed to it then the Trustee shall distribute the then principal andincome to one or more organizations described in sectsect 170(c) and 2055(a) of the Code as the Trustee shall select and inthe proportions as the Trustee shall decide in the Trusteersquos sole discretion






In each taxable year of the trust during the unitrust period the Trustee shall pay to [permissible recipient] and to[permissible recipient] (hereinafter ldquothe Recipientsrdquo) in equal shares during their joint lives a unitrust amount equalto the lesser of (a) a fixed percentage amount equal to [a number no less than 5 and no more than 50] percent ofthe net fair market value of the assets of the trust valued as of the valuation date (hereinafter ldquothe fixed percentageamount described in (a) of paragraph 1rdquo) or (b) the trust income for the taxable year as defined in sect 643(b) of the Codeand the applicable regulations Upon the death of one of the Recipients (hereinafter ldquothe Predeceasing Recipientrdquo)the Trustee shall pay the entire unitrust amount to the survivor (hereinafter ldquothe Survivor Recipientrdquo) The valuationdate is the first day of each taxable year of the trust The first day of the unitrust period shall be the date of my deathand the last day of the unitrust period shall be the date of the Survivor Recipientrsquos death The unitrust amount shallbe paid in equal quarterly installments at the end of each calendar quarter from income Any income of the trust fora taxable year in excess of the unitrust amount shall be added to principal

(c) Replace paragraph 3 Proration of Unitrust Amount of the sample trust with the following paragraphProration of Unitrust Amount For a short taxable year and for the taxable year during which the unitrust periodends the Trustee shall prorate on a daily basis the fixed percentage amount described in (a) of paragraph 1 In sucha year this prorated fixed percentage amount shall be used in place of the fixed percentage amount described in (a)of paragraph 1 to determine the unitrust amount payable for that year Upon the death of the Predeceasing Recipientthe Trustee shall prorate on a daily basis the next regular unitrust payment due after the death of the PredeceasingRecipient between the estate of the Predeceasing Recipient and the Survivor Recipient


(1) Explanation As an alternative to using the fixed percentage method of calculating the unitrust amount in paragraph 1 ofthe sample trust a CRUT may use the net income with make-up method for calculating the unitrust amount Under thenet income with make-up method the unitrust amount consists of two components (i) the amount determined under thenet income method (as described in section 605 of this revenue procedure) and (ii) the amount of trust income that is inexcess of the fixed percentage amount for that year but only to the extent that the aggregate of the unitrust amounts paidto the recipients in prior years was less than the amounts that would have been paid to the recipients if the unitrust amount





In each taxable year of the trust during the unitrust period the Trustee shall pay to [permissible recipient] and to[permissible recipient] (hereinafter ldquothe Recipientsrdquo) in equal shares during their joint lives a unitrust amount equalto the lesser of (a) a fixed percentage amount equal to [a number no less than 5 and no more than 50] percent ofthe net fair market value of the assets of the trust valued as of the valuation date (hereinafter ldquothe fixed percentageamount described in (a) of paragraph 1rdquo) or (b) the trust income for the taxable year as defined in sect 643(b) of theCode and the applicable regulations The unitrust amount for a taxable year shall also include any amount of trustincome for the year that is in excess of [the fixed percentage amount determined under (a) of this paragraph for theyear] but only to the extent that the aggregate of the amounts paid to the Recipients in prior years was less than theaggregate of the amounts determined for all prior years under (a) of this paragraph Upon the death of one of theRecipients (hereinafter ldquothe Predeceasing Recipientrdquo) the Trustee shall pay the entire unitrust amount to the survivor(hereinafter ldquothe Survivor Recipientrdquo) The valuation date is the first day of each taxable year of the trust The firstday of the unitrust period shall be the date of my death and the last day of the unitrust period shall be the date ofthe Survivor Recipientrsquos death The unitrust amount shall be paid in equal quarterly installments at the end of eachcalendar quarter from income Any income of the trust for a taxable year in excess of the unitrust amount shall beadded to principal







(i) Unitrust amount determined by net income method In each taxable year of the trust during the unitrust period theTrustee shall pay to [permissible recipient] and to [permissible recipient] (hereinafter ldquothe Recipientsrdquo) in equal sharesduring their joint lives a unitrust amount equal to the lesser of (a) a fixed percentage amount equal to [a number


no less than 5 and no more than 50] percent of the net fair market value of the assets of the trust valued as of thevaluation date (hereinafter ldquothe fixed percentage amount described in (a) of paragraph 1(i)rdquo) or (b) the trust incomefor the taxable year as defined in sect 643(b) of the Code and the applicable regulations Upon the death of one of theRecipients (hereinafter ldquothe Predeceasing Recipientrdquo) the Trustee shall pay the entire unitrust amount to the survivor(hereinafter ldquothe Survivor Recipientrdquo) The unitrust amount shall be paid in equal quarterly installments at the end ofeach calendar quarter from income Any income of the trust for a taxable year in excess of the unitrust amount shallbe added to principal

(ii) Conversion to fixed percentage method of determining unitrust amount Notwithstanding paragraph 1(i) upon theoccurrence of [permissible triggering event as described in sect 1664ndash3(a)(1)(i)(c) and (d) of the Income Tax Regula-tions] (hereinafter ldquothe triggering eventrdquo) and effective as of the first day of the taxable year that immediately followsthe triggering event (hereinafter ldquothe effective date of the triggering eventrdquo) in each remaining taxable year of thetrust during the unitrust period the Trustee shall pay to the Recipients in equal shares during their joint lives a unitrustamount equal to [same percentage used in (a) of paragraph 1(i)] percent of the net fair market value of the trust assetsas of the valuation date and upon the death of the Predeceasing Recipient the Trustee shall pay the entire unitrustamount to the Survivor Recipient Beginning on the effective date of the triggering event the Trustee shall no longerpay the amount equal to the lesser of (a) or (b) in paragraph 1(i) The unitrust amount shall be paid in equal quarterlyinstallments at the end of each calendar quarter from income and to the extent income is not sufficient from principalAny income of the trust for a taxable year in excess of the unitrust amount shall be added to principal

(iii) In general The first day of the unitrust period shall be the date of my death and the last day of the unitrust periodshall be the date of the Survivor Recipientrsquos death The valuation date is the first day of each taxable year of the trustIf for any year the net fair market value of the trust assets is incorrectly determined then within a reasonable periodafter the correct value is finally determined the Trustee shall pay to the Predeceasing Recipient andor the SurvivorRecipient (in the case of an undervaluation) or receive from the Predeceasing Recipient andor the Survivor Recipient(in the case of an overvaluation) an amount equal to the difference between the unitrust amount(s) properly payableand the unitrust amount(s) actually paid




(iii) Proration of unitrust amount between Predeceasing Recipient and Survivor Recipient Upon the death of the Prede-ceasing Recipient the Trustee shall prorate on a daily basis the next regular unitrust payment due after the death ofthe Predeceasing Recipient between the estate of the Predeceasing Recipient and the Survivor Recipient




(i) Unitrust amount determined by net income with make-up method In each taxable year of the trust during the unitrustperiod the Trustee shall pay to [permissible recipient] and to [permissible recipient] (hereinafter ldquothe Recipientsrdquo) inequal shares during their joint lives a unitrust amount equal to the lesser of (a) a fixed percentage amount equal to[a number no less than 5 and no more than 50] percent of the net fair market value of the assets of the trust valuedas of the valuation date (hereinafter ldquothe fixed percentage amount described in (a) of paragraph 1(i)rdquo) or (b) the trustincome for the taxable year as defined in sect 643(b) of the Code and the applicable regulations The unitrust amountfor a taxable year shall also include any amount of trust income for the year that is in excess of [the fixed percentageamount determined under (a) of paragraph 1(i) for the year] but only to the extent that the aggregate of the amountspaid to the Recipients in prior years was less than the aggregate of the amounts determined for all prior years under(a) of paragraph 1(i) Upon the death of one of the Recipients (herein ldquothe Predeceasing Recipientrdquo) the Trustee shallpay the entire unitrust amount to the survivor (herein ldquothe Survivor Recipientrdquo) The unitrust amount shall be paid inequal quarterly installments at the end of each calendar quarter from income Any income of the trust for a taxableyear in excess of the unitrust amount shall be added to principal


(ii) Conversion to fixed percentage method of determining unitrust amount Notwithstanding paragraph 1(i) upon theoccurrence of [permissible triggering event as described in sect 1664ndash3(a)(1)(i)(c) and (d) of the Income Tax Regula-tions] (hereinafter ldquothe triggering eventrdquo) and effective as of the first day of the taxable year that immediately followsthe triggering event (hereinafter ldquothe effective date of the triggering eventrdquo) in each remaining taxable year of thetrust during the unitrust period the Trustee shall pay to the Recipients in equal shares during their joint lives a unitrustamount equal to [same percentage used in (a) of paragraph 1(i)] percent of the net fair market value of the trust assetsas of the valuation date and upon the death of the Predeceasing Recipient the Trustee shall pay the entire unitrustamount to the Survivor Recipient Beginning on the effective date of the triggering event the Trustee shall no longerpay the amount equal to the lesser of (a) or (b) in paragraph 1(i) and shall not pay any amount of trust income de-scribed in the second sentence of paragraph 1(i) The unitrust amount shall be paid in equal quarterly installments atthe end of each calendar quarter from income and to the extent income is not sufficient from principal Any incomeof the trust for a taxable year in excess of the unitrust amount shall be added to principal











Definition of TermsRevenue rulings and revenue procedures(hereinafter referred to as ldquorulingsrdquo) thathave an effect on previous rulings use thefollowing defined terms to describe the ef-fect

Amplified describes a situation whereno change is being made in a prior pub-lished position but the prior position is be-ing extended to apply to a variation of thefact situation set forth therein Thus ifan earlier ruling held that a principle ap-plied to A and the new ruling holds that thesame principle also applies to B the earlierruling is amplified (Compare with modi-fied below)

Clarified is used in those instanceswhere the language in a prior ruling is be-ing made clear because the language hascaused or may cause some confusionIt is not used where a position in a priorruling is being changed

Distinguished describes a situationwhere a ruling mentions a previously pub-lished ruling and points out an essentialdifference between them

Modified is used where the substanceof a previously published position is beingchanged Thus if a prior ruling held that aprinciple applied to A but not to B and thenew ruling holds that it applies to both A

and B the prior ruling is modified becauseit corrects a published position (Comparewith amplified and clarified above)

Obsoleted describes a previously pub-lished ruling that is not considered deter-minative with respect to future transac-tions This term is most commonly used ina ruling that lists previously published rul-ings that are obsoleted because of changesin laws or regulations A ruling may alsobe obsoleted because the substance hasbeen included in regulations subsequentlyadopted

Revoked describes situations where theposition in the previously published rulingis not correct and the correct position isbeing stated in a new ruling

Superseded describes a situation wherethe new ruling does nothing more than re-state the substance and situation of a previ-ously published ruling (or rulings) Thusthe term is used to republish under the1986 Code and regulations the same po-sition published under the 1939 Code andregulations The term is also used whenit is desired to republish in a single rul-ing a series of situations names etc thatwere previously published over a period oftime in separate rulings If the new rul-ing does more than restate the substance

of a prior ruling a combination of termsis used For example modified and su-perseded describes a situation where thesubstance of a previously published rulingis being changed in part and is continuedwithout change in part and it is desired torestate the valid portion of the previouslypublished ruling in a new ruling that is selfcontained In this case the previously pub-lished ruling is first modified and then asmodified is superseded

Supplemented is used in situations inwhich a list such as a list of the names ofcountries is published in a ruling and thatlist is expanded by adding further names insubsequent rulings After the original rul-ing has been supplemented several times anew ruling may be published that includesthe list in the original ruling and the ad-ditions and supersedes all prior rulings inthe series

Suspended is used in rare situationsto show that the previous published rul-ings will not be applied pending somefuture action such as the issuance of newor amended regulations the outcome ofcases in litigation or the outcome of aService study

AbbreviationsThe following abbreviations in current useand formerly used will appear in materialpublished in the Bulletin

AmdashIndividualAcqmdashAcquiescenceBmdashIndividualBEmdashBeneficiaryBKmdashBankBTAmdashBoard of Tax AppealsCmdashIndividualCBmdashCumulative BulletinCFRmdashCode of Federal RegulationsCImdashCityCOOPmdashCooperativeCtDmdashCourt DecisionCYmdashCountyDmdashDecedentDCmdashDummy CorporationDEmdashDoneeDel OrdermdashDelegation OrderDISCmdashDomestic International Sales CorporationDRmdashDonorEmdashEstateEEmdashEmployeeEOmdashExecutive Order

ERmdashEmployerERISAmdashEmployee Retirement Income Security ActEXmdashExecutorFmdashFiduciaryFCmdashForeign CountryFICAmdashFederal Insurance Contributions ActFISCmdashForeign International Sales CompanyFPHmdashForeign Personal Holding CompanyFRmdashFederal RegisterFUTAmdashFederal Unemployment Tax ActFXmdashForeign corporationGCMmdashChief Counselrsquos MemorandumGEmdashGranteeGPmdashGeneral PartnerGRmdashGrantorICmdashInsurance CompanyIRBmdashInternal Revenue BulletinLEmdashLesseeLPmdashLimited PartnerLRmdashLessorMmdashMinorNonacqmdashNonacquiescenceOmdashOrganizationPmdashParent CorporationPHCmdashPersonal Holding CompanyPOmdashPossession of the USPRmdashPartner

PRSmdashPartnershipPTEmdashProhibited Transaction ExemptionPub LmdashPublic LawREITmdashReal Estate Investment TrustRev ProcmdashRevenue ProcedureRev RulmdashRevenue RulingSmdashSubsidiarySPRmdashStatement of Procedural RulesStatmdashStatutes at LargeTmdashTarget CorporationTCmdashTax CourtTD mdashTreasury DecisionTFEmdashTransfereeTFRmdashTransferorTIRmdashTechnical Information ReleaseTPmdashTaxpayerTRmdashTrustTTmdashTrusteeUSCmdashUnited States CodeXmdashCorporationYmdashCorporationZ mdashCorporation

August 22 2005 i 2005ndash34 IRB

Numerical Finding List1

Bulletins 2005ndash27 through 2005ndash34

Announcements

2005-46 2005-27 IRB 63

2005-47 2005-28 IRB 71

2005-48 2005-29 IRB 111

2005-49 2005-29 IRB 119

2005-50 2005-30 IRB 152

2005-51 2005-32 IRB 283

2005-52 2005-31 IRB 257

2005-53 2005-31 IRB 258

2005-54 2005-32 IRB 283

2005-55 2005-33 IRB 317

2005-56 2005-33 IRB 318

2005-57 2005-33 IRB 318

2005-58 2005-33 IRB 319

Notices

2005-48 2005-27 IRB 9

2005-49 2005-27 IRB 14

2005-50 2005-27 IRB 14

2005-51 2005-28 IRB 74

2005-52 2005-28 IRB 75

2005-53 2005-32 IRB 263

2005-54 2005-30 IRB 127

2005-55 2005-32 IRB 265

2005-56 2005-32 IRB 266

2005-57 2005-32 IRB 267

2005-58 2005-33 IRB 295

Proposed Regulations

REG-130241-04 2005-27 IRB 18

REG-138362-04 2005-33 IRB 299

Revenue Procedures

2005-35 2005-28 IRB 76

2005-36 2005-28 IRB 78

2005-37 2005-28 IRB 79

2005-38 2005-28 IRB 81

2005-39 2005-28 IRB 82

2005-40 2005-28 IRB 83

2005-41 2005-29 IRB 90

2005-42 2005-30 IRB 128

2005-43 2005-29 IRB 107

2005-44 2005-29 IRB 110

2005-45 2005-30 IRB 141

2005-46 2005-30 IRB 142

2005-47 2005-32 IRB 269

2005-48 2005-32 IRB 271

2005-49 2005-31 IRB 165

2005-50 2005-32 IRB 272

2005-51 2005-33 IRB 296

2005-52 2005-34 IRB 326

2005-53 2005-34 IRB 339

Revenue Proceduresmdash Continued

2005-54 2005-34 IRB 353

2005-55 2005-34 IRB 367

2005-56 2005-34 IRB 383

2005-57 2005-34 IRB 392

2005-58 2005-34 IRB 402

2005-59 2005-34 IRB 412

Revenue Rulings

2005-38 2005-27 IRB 6

2005-39 2005-27 IRB 1

2005-40 2005-27 IRB 4

2005-41 2005-28 IRB 69

2005-42 2005-28 IRB 67

2005-43 2005-29 IRB 88

2005-44 2005-29 IRB 87

2005-45 2005-30 IRB 123

2005-46 2005-30 IRB 120

2005-47 2005-32 IRB 261

2005-48 2005-32 IRB 259

2005-49 2005-30 IRB 125

2005-50 2005-30 IRB 124

2005-51 2005-31 IRB 163

2005-54 2005-33 IRB 289

2005-55 2005-33 IRB 284

Tax Conventions

2005-47 2005-28 IRB 71

Treasury Decisions

9208 2005-31 IRB 157

9209 2005-31 IRB 153

9210 2005-33 IRB 290

9211 2005-33 IRB 287

1 A cumulative list of all revenue rulings revenue procedures Treasury decisions etc published in Internal Revenue Bulletins 2005ndash1 through 2005ndash26 is in Internal Revenue Bulletin2005ndash26 dated June 27 2005

2005ndash34 IRB ii August 22 2005

Finding List of Current Actions onPreviously Published Items1


Notices

2005-51

Modified and superseded by

Notice 2005-57 2005-32 IRB 267


REG-142686-01

Withdrawn by

Ann 2005-55 2005-33 IRB 317

REG-100420-03

Corrected by

Ann 2005-57 2005-33 IRB 318

REG-102144-04

Corrected by

Ann 2005-56 2005-33 IRB 318

Revenue Procedures

64-54

Obsoleted by

Rev Rul 2005-43 2005-29 IRB 88

66-33

Obsoleted by

Rev Rul 2005-43 2005-29 IRB 88

69-13

Obsoleted by

Rev Rul 2005-43 2005-29 IRB 88

70-8

Modified by

Rev Proc 2005-46 2005-30 IRB 142

71-1

Obsoleted by

Rev Rul 2005-43 2005-29 IRB 88

72-22

Obsoleted by

Rev Rul 2005-43 2005-29 IRB 88

87-8

Obsoleted by

Rev Proc 2005-44 2005-29 IRB 110

87-9

Obsoleted by

Rev Proc 2005-44 2005-29 IRB 110

89-20

Superseded by

Rev Proc 2005-52 2005-34 IRB 326

90ndash11

Modified by

Rev Proc 2005-40 2005-28 IRB 83


90-30

Section 4 superseded by

Rev Proc 2005-54 2005-34 IRB 353


Rev Proc 2005-55 2005-34 IRB 367


Rev Proc 2005-56 2005-34 IRB 383


Rev Proc 2005-58 2005-34 IRB 402


Rev Proc 2005-59 2005-34 IRB 412

90-31


Rev Proc 2005-52 2005-34 IRB 326


Rev Proc 2005-54 2005-34 IRB 353


Rev Proc 2005-55 2005-34 IRB 367


Rev Proc 2005-56 2005-34 IRB 383


Rev Proc 2005-58 2005-34 IRB 402


Rev Proc 2005-59 2005-34 IRB 412

93-22

Obsoleted by

Rev Proc 2005-44 2005-29 IRB 110

98-18

Obsoleted by

Rev Proc 2005-45 2005-30 IRB 141

2000-49

Superseded by

Rev Proc 2005-41 2005-29 IRB 90

2001-16

Superseded by

Rev Proc 2005-42 2005-30 IRB 128

2002-9

Modified and amplified by

Rev Rul 2005-42 2005-28 IRB 67Rev Proc 2005-35 2005-28 IRB 76Rev Proc 2005-43 2005-29 IRB 107Rev Proc 2005-47 2005-32 IRB 269

2004-50

Superseded by

Rev Proc 2005-49 2005-31 IRB 165

Revenue Rulings

65-109

Obsoleted by

Rev Rul 2005-43 2005-29 IRB 88

68-549

Obsoleted by

Rev Rul 2005-43 2005-29 IRB 88

Revenue Rulingsmdash Continued

82-29

Modified and clarified by

Rev Proc 2005-39 2005-28 IRB 82

2005-41

Corrected by

Ann 2005-50 2005-30 IRB 152

Treasury Decisions

9186

Corrected by

Ann 2005-53 2005-31 IRB 258

9206

Corrected by

Ann 2005-49 2005-29 IRB 119

9207

Corrected by

Ann 2005-52 2005-31 IRB 257

1 A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2005ndash1 through 2005ndash26 is in Internal Revenue Bulletin 2005ndash26 dated June 27 2005

August 22 2005 iii 2005ndash34 IRBUS Government Printing Office 2005mdash310ndash36520019

Sheet1

Year Age Life Expec Rate 1231 Value before MRD MRD 1231 Value after MRD

2021 50 1075 100000000$

2022 51 333 1075 107500000$ 3003003$ 104496997$

2023 52 323 1075 112334272$ 3235201$ 109099071$

2024 53 313 1075 117281501$ 3485593$ 113795908$

2025 54 303 1075 122330601$ 3755641$ 118574960$

2026 55 293 1075 127468082$ 4046927$ 123421155$

2027 56 283 1075 132677742$ 4361172$ 128316570$

2028 57 273 1075 137940313$ 4700241$ 133240072$

2029 58 263 1075 143233078$ 5066162$ 138166915$

2030 59 253 1075 148529434$ 5461143$ 143068291$

2031 60 243 1075 153798413$ 5887584$ 147910829$

2032 61 233 1075 159004141$ 6348104$ 152656037$

2033 62 223 1075 164105240$ 6845562$ 157259677$

2034 63 213 1075 169054153$ 7383083$ 161671070$

2035 64 203 1075 173796400$ 7964092$ 165832308$

2036 65 193 1075 178269731$ 8592348$ 169677383$

2037 66 183 1075 182403187$ 9271988$ 173131199$

2038 67 173 1075 186116039$ 10007584$ 176108455$

2039 68 163 1075 189316589$ 10804200$ 178512390$

2040 69 153 1075 191900819$ 11667476$ 180233342$

2041 70 143 1075 193750843$ 12603730$ 181147113$

2042 71 133 1075 194733146$ 13620084$ 181113063$

2043 72 123 1075 194696542$ 14724639$ 179971903$

2044 73 113 1075 193469796$ 15926717$ 177543079$

2045 74 103 1075 190858810$ 17237192$ 173621618$

2046 75 93 1075 186643239$ 18668991$ 167974248$

2047 76 83 1075 180572316$ 20237861$ 160334455$

2048 77 73 1075 172359539$ 21963624$ 150395915$

2049 78 63 1075 161675609$ 23872368$ 137803241$

2050 79 53 1075 148138485$ 26000612$ 122137873$

2051 80 43 1075 131298213$ 28404157$ 102894057$

2052 81 33 1075 110611111$ 31180017$ 79431094$

2053 82 23 1075 85388426$ 34535258$ 50853168$

2054 83 13 1075 54667155$ 39117821$ 15549334$

2055 84 03 1075 16715534$ 16715534$ 000$

456695709$

Page 1

Sheet1

Year Age Rate 1231 Value before CampA Cont Annuity 1231 Value After CampA2021 50 1075 12716045$ 87283955$ 2022 51 1075 93830252$ -$ 12716045$ 81114207$ 2023 52 1075 87197772$ -$ 12716045$ 74481727$ 2024 53 1075 80067857$ -$ 12716045$ 67351812$ 2025 54 1075 72403198$ -$ 12716045$ 59687153$ 2026 55 1075 64163689$ -$ 12716045$ 51447644$ 2027 56 1075 55306217$ -$ 12716045$ 42590172$ 2028 57 1075 45784435$ -$ 12716045$ 33068390$ 2029 58 1075 35548519$ -$ 12716045$ 22832474$ 2030 59 1075 24544910$ -$ 12716045$ 11828865$ 2031 60 1075 12716030$ -$ 12716030$ (000)$

139876480$

Page 1

Charitable Remainder Unitrust 9192021

Trust Type LifeTransfer Date 92021sect7520 Rate 120 The sect7520 rate does not match the current or prior 2 months computed for the transfer dateFMV of Trust $1000000Growth Rate 150Income Rate 600Optimized YesUsing Optimized Payout 971963Payment Period QuarterlyMonths Val Precedes Payout 3Lives 1Ages 50CRUT Type Normal

Payout Sequence Factor 0992578Adjusted Payout Rate 9647Interpolation

Factor at 96 010081Factor at 98 009739Difference 000342

(9647 - 96) 02 = X 000342 Therefore X = 000080Life Remainder Factor = Factor at 96 Less X 010001

Present Value of Remainder Interest = $100000000 x 010001 $10001000Donors Deduction $10001000Donors Deduction as Percentage of Amount Transferred 10001

Page 1


Deduction as Percentage of Amount Transferred

9000

1000

$899990 Non-deductible $100010 Deductible

Page 2


Beginning Principal IncomeYear Principal Growth RecdAccrd Distribution Remainder

1 $100000000 $1445328 $5825377 $9719632 $975510732 $97551073 $1409934 $5682718 $9481604 $951621213 $95162121 $1375404 $5543552 $9249408 $928316694 $92831669 $1341722 $5407794 $9022896 $905582895 $90558289 $1308864 $5275361 $8801932 $883405826 $88340582 $1276810 $5146171 $8586380 $861771837 $86177183 $1245542 $5020145 $8376104 $840667668 $84066766 $1215039 $4897206 $8170980 $820080319 $82008031 $1185284 $4777277 $7970876 $7999971610 $79999716 $1156258 $4660285 $7775676 $7804058311 $78040583 $1127942 $4546159 $7585256 $7612942812 $76129428 $1100318 $4434825 $7399500 $7426507113 $74265071 $1073374 $4326220 $7218288 $7244637714 $72446377 $1047087 $4220274 $7041520 $7067221815 $70672218 $1021445 $4116923 $6869080 $6894150616 $68941506 $996431 $4016102 $6700860 $6725317917 $67253179 $972028 $3917751 $6536760 $6560619818 $65606198 $948224 $3821808 $6376680 $6399955019 $63999550 $925003 $3728216 $6220520 $6243224920 $62432249 $902350 $3636913 $6068184 $6090332821 $60903328 $880252 $3547848 $5919580 $5941184822 $59411848 $858695 $3460963 $5774612 $5795689423 $57956894 $837666 $3376207 $5633196 $5653757124 $56537571 $817153 $3293527 $5495244 $5515300725 $55153007 $797142 $3212871 $5360668 $5380235226 $53802352 $777620 $3134189 $5229392 $5248476927 $52484769 $758576 $3057436 $5101324 $5119945728 $51199457 $740000 $2982561 $4976400 $4994561829 $49945618 $721878 $2909520 $4854528 $48722488

Summary $30263369 $121976199 $203517080 $48722488

Page 3

9192021

Charitable Remainder Unitrust (CRUT)

This calculation determines your deduction for a contribution to a charitable remainder unitrust It also calculates yourdeduction as a percentage of the amount transferred

When a charitable remainder unitrust is established a donor transfers cash andor property to an irrevocable trust butretains (either for himself or for one or more non-charitable beneficiaries) a variable annuity (payments that can vary inamount but are a fixed percentage) from that trust At the end of a specified term or upon the death of the beneficiary(or beneficiaries and the donor and the donors spouse can be the beneficiaries) the remainder interest in the propertypasses to the charity the donor has specified

The principal difference between a charitable remainder unitrust and a charitable remainder annuity trust is that aunitrust pays a varying annuity In other words the amount paid is likely to change each year The payable amount isbased on annual fluctuations in the value of the trusts property As it goes up so does the annuity paid each year If itdrops in value so will the annuity

A gift to a charitable remainder unitrust will qualify for income and gift tax charitable deductions (or an estate taxcharitable deduction) only if the following conditions are met

A fixed percentage (not less than 5 nor more than 50) of the net fair market value of theassets is paid to one or more non-charitable beneficiaries who are living when the unitrust isestablished The charitys actuarial interest must be at least 10 of any assets transferred tothe trust

The unitrust assets must be revalued each year and the fixed percentage amount must be paidat least once a year for the term of the trust which must be a fixed period of 20 years or less ormust be until the death of the noncharitable beneficiaries all of whom must be living at thebeginning of the trust

No sum can be paid except the fixed percentage during the term of the trust and at the end ofthe term of the trust the entire balance of the trusts assets must be paid to one or morequalified charities

The donor receives an immediate income tax deduction for the present value of the remainder interest that will pass tothe charity at the end of the term

Because a charitable remainder unitrust is exempt from federal income tax (the income and gains of the trust are onlytaxed when they are distributed to the noncharitable beneficiaries as part of the fixed percentage of trust assetsdistributed each year) they are frequently used to defer income tax on gains about to be realized For example if adonor has an appreciated asset that is about to be sold the donor can give the asset to a charitable remainder unitrustreserving the right to received a fixed percentage of the value of the trust for life and for the life of the donors spouse aswell and the asset can then be sold by the trust and the proceeds of sale reinvested without payment of any federalincome tax on capital gains The capital gains will be taxable to the donor (or the donors spouse) only as they aredistributed to the donor as part of the annual distributions from the trust

A variation of the CRUT (which pays a fixed percentage of the value of the trust assets regardless of income) is thenet-income CRUT or ldquoNICRUTrdquo which pays either the fixed percentage or the income actually received by the trustwhichever is less A variation of the ldquoNICRUTrdquo is the net-income-with-makeup CRUT or NIMCRUT This can be usedif the income is less than the fixed percentage the deficiency can be paid in a future year as soon as the trust hasincome which exceeds the fixed percentage An additional variation is a flip unitrust which is a trust that changesfrom a NIMCRUT to a regular CRUT upon the occurrence of a specific event such as the sale of a specific asset thatwas contributed to the trust and was not expected to produce much income However NICRUTs NIMCRUTs and flipCRUTs are valued in the same way as a regular CRUT for the purpose of determining the income estate and gift taxcharitable deduction

Page 4

05 Instructions for IRS Form 5227 (W2885368xA1F97)pdf

Future Developments

Reminders

General Instructions

Purpose of Form

Who Must File

Which Parts To Complete

Definitions

Photographs of Missing Children

Phone Help

Additional Information

Other Forms You May Have To File

Period To Be Covered by Return

Accounting Methods

When To File

Where To File

Penalty for Failure To File Timely Completely or Correctly

Trust Instrument

Rounding Off to Whole Dollars

Attachments

Specific Instructions

Identification Area

Address

A Employer Identification Number (EIN)

B Type of Entity

D Gross Income

E Initial Return Final Return Amended Return or Change of Name or Address

G Unrelated Business Taxable Income (Section 664 trust only)

Part I Income and Deductions

Section AmdashOrdinary Income

Section BmdashCapital Gains (Losses)

Section CmdashNontaxable Income

Section DmdashDeductions

Section EmdashDeductions Allocable to Income Categories (Section 664 trust only)

Part II Schedule of Distributable Income (Section 664 trust only)Schedule of Distributable Income

Part III-A Distributions of Principal for Charitable Purposes

Part III-B Accumulated Income Set Aside and Income Distributions for Charitable Purposes

Part IV Balance Sheet

Column (c)

Parts V-A and V-B Charitable Remainder Trust Information

Parts VI-A and VI-B Statements Regarding Activities

Part VI-A

Part VI-B

Part VII Questionnaire for Charitable Lead Trusts Pooled Income Funds and Charitable Remainder Trusts

Section AmdashAll Trusts

Section BmdashCharitable Lead Trusts

Section CmdashPooled Income Funds

Section DmdashCharitable Remainder Trusts

Signature

Schedule AmdashDistributions Assets and Donor Information

Qualified Business Income Deduction

Part I-A Accumulation Schedule (Section 664 trust only)

Part I-B Simplified Net Investment Income Calculation Election (SNIIC Election) Net Investment Income Tax (NIIT)(Section 664 trust only)

Amount of NII Allocable to Income Recipients

Calculation of NII

When To Make the SNIIC Election

Effect of the SNIIC Election on Netting and Ordering Rules

Part II-A Current Distributions Schedule (Section 664 trust only)

Column (b) Recipients Identifying Number

Part II-B Current Distributions

Part III Assets and Donor Information

Paperwork Reduction Act Notice

Index

06 Internal Revenue Bulletin 2005-34 (W2885369xA1F97)pdf

toc

INCOME TAX

Rev Proc 2005ndash53 page 00







ESTATE TAX








GIFT TAX




The IRS Mission

Introduction

Part I Rulings and Decisions Under the Internal Revenue Code of

Part III Administrative Procedural and Miscellaneous


SECTION 1 PURPOSE



SECTION 4 SAMPLE INTER VIVOS CHARITABLE REMAINDER UNITRUST mdash ON

SECTION 5 ANNOTATIONS REGARDING SAMPLE INTER VIVOS CHARITABLE R

01 Annotations for Introductory Paragraph and Paragraph 1 Fund

02 Annotations for Paragraph 2 Payment of Unitrust Amount of

03 Annotations for Paragraph 3 Proration of Unitrust Amount o

04 Annotations for Paragraph 4 Distribution to Charity of the

05 Annotations for Paragraph 5 Additional Contributions of th

06 Annotations for Paragraph 6 Deferral of the Unitrust Paymen

07 Annotations for Paragraph 7 Unmarketable Assets of the Sam

08 Annotations for Paragraph 8 Prohibited Transactions of the

SECTION 6 ALTERNATE PROVISIONS FOR SAMPLE INTER VIVOS CHARITABL

01 Payment of Part of the Unitrust Amount to an Organization De




05 Retaining the Right to Substitute the Charitable Remainderma

06 Power of Appointment to Designate the Charitable Remainderma


08 Net Income with Make-up Method of Calculating the Unitrust A





SECTION 1 PURPOSE



SECTION 4 SAMPLE INTER VIVOS CHARITABLE REMAINDER UNITRUST mdash T

SECTION 5 ANNOTATIONS REGARDING SAMPLE INTER VIVOS CHARITABLE



03 Annotation for Paragraph 3 Proration of Unitrust Amount of






SECTION 6 ALTERNATE PROVISIONS FOR SAMPLE INTER VIVOS CHARITAB


02 Apportionment of the Unitrust Amount Among Members of a Name










SECTION 1 PURPOSE



SECTION 4 SAMPLE INTER VIVOS CHARITABLE REMAINDER UNITRUST mdash TW




03 Annotation for Paragraph 3 Payment of Federal Estate Taxes










03 Retaining the Right to Revoke the Interest of the Successor











SECTION 1 PURPOSE

















03 Retaining the Right to Revoke the Interest of the Survivor R











SECTION 1 PURPOSE



SECTION 4 SAMPLE TESTAMENTARY CHARITABLE REMAINDER UNITRUST mdash O

SECTION 5 ANNOTATIONS REGARDING SAMPLE TESTAMENTARY CHARITABLE



03 Annotations for Paragraph 2 Deferral Provision of the Samp





SECTION 6 ALTERNATE PROVISIONS FOR SAMPLE TESTAMENTARY CHARITAB











SECTION 1 PURPOSE



SECTION 4 SAMPLE TESTAMENTARY CHARITABLE REMAINDER UNITRUST mdash




03 Annotations for Paragraph 2 Deferral Provision of the Sam

04 Annotations for Paragraph 3 Proration of Unitrust Amount

05 Annotations for Paragraph 4 Distribution to Charity of th

06 Annotations for Paragraph 6 Unmarketable Assets of the Sa


SECTION 6 ALTERNATE PROVISIONS FOR SAMPLE TESTAMENTARY CHARITA

01 Payment of Part of the Unitrust Amount to an Organization D

02 Apportionment of the Unitrust Amount Among Members of a Nam


04 Power of Appointment to Designate the Charitable Remainderm


06 Net Income with Make-up Method of Calculating the Unitrust




SECTION 1 PURPOSE











07 Annotations for Paragraph 7 Prohibited Transactions of th












SECTION 1 PURPOSE






















Definition of Terms

Abbreviations

Numerical Finding List 1

Announcements

Notices


Revenue Procedures

Revenue Rulings

Tax Conventions

Treasury Decisions

Finding List of Current Actions on Previously Published Items 1

Notices


Revenue Procedures

Revenue Rulings

Treasury Decisions

W2896042DOCX1

2021 National Conference on Special Needs Planning

and Special Needs Trusts

Tax Intensive Charitable Remainder Trusts


For many beneficiaries the SECURE Act shortened the distribution period to receive inherited

retirement benefits from ldquolife expectancyrdquo to ten years

The shortened distribution period leads to less deferral of income taxation which is exacerbated

when the beneficiary of inherited retirement benefits is a non-grantor trust due to trusts having

ldquocompressedrdquo income tax brackets when compared to individuals

So please consider with us this problem

Your client Jane Doe a widow and age 83 wants to leave money equally to her three children

who are Joseph Doe (50) Janet Doe (48) and Jake Doe (45) Joseph is not disabled as

determined by the Social Security Administration (not for a lack of trying however) Joseph has

some learning disabilities communication impairments is socially challenged and is

economically challenged Joseph lives with Jane and she is primary caretaker social outlet and

ldquoprotectorrdquo Jane considers Joseph to be a ldquovulnerablerdquo adult Janersquos other two children are

married have children and are independent She has a wonderful relationship with all three of

her children

Jane and her deceased husband (John Doe) worked very hard over the years have done quite

well for themselves and she now has a $3M IRA along with other assets and a considerable

inheritance from her parents Her primary objective with her estate planning is treat all of her

children equally but she wants Josephrsquos share to go ldquoin trustrdquo for Josephrsquos benefit with a third-

party professional trustee

What is the best way for Jane to leave her IRA to Joseph We will explore possible options

answers and solutions to that question in this session




(b) C









(c) T


(2) E




(d) D

(1) C








(2) C








(3) E




(4) S

Ifmdash




(e) V Ads by



(f) C




(g) Q

(1) I








(2) E





(3) P










(4) Q




(5) T 5-

(A) In general









(6) T




(7) A

(A) In general



(i) $30000 or




US Code Toolbox



60


ACCESSIBILITY

ABOUT LII

CONTACT US

ADVERTISE HERE

HELP

TERMS OF USE

PRIVACY




AH XSLXML Fileid hellip ionsI52272020AXMLCycle05source (Init amp Date) _______Page 1 of 20 1605 - 19-Nov-2020The type and rule above prints on all proofs including departmental reproduction proofs MUST be removed before printing








Nov 19 2020 Cat No 13228E

of 20 Fileid hellip ionsI52272020AXMLCycle05source 1605 - 19-Nov-2020The type and rule above prints on all proofs including departmental reproduction proofs MUST be removed before printing




























CAUTION
















































































































CAUTION









CAUTION

















TIP

TIP









CAUTION


































































year






































5 Total



















Index





Income 14





Worksheet 19


deduction 1


TType of Entity 4




INCOME TAX











ESTATE TAX












GIFT TAX































































SECTION 1 PURPOSE



















































































































































































SECTION 1 PURPOSE























































































































































































SECTION 1 PURPOSE


































































































































































































SECTION 1 PURPOSE





































































































































































































SECTION 1 PURPOSE





































































































































SECTION 1 PURPOSE











































































































































SECTION 1 PURPOSE


















































































































































SECTION 1 PURPOSE



































































































































































Announcements

2005-46 2005-27 IRB 63

2005-47 2005-28 IRB 71

2005-48 2005-29 IRB 111

2005-49 2005-29 IRB 119

2005-50 2005-30 IRB 152

2005-51 2005-32 IRB 283

2005-52 2005-31 IRB 257

2005-53 2005-31 IRB 258

2005-54 2005-32 IRB 283

2005-55 2005-33 IRB 317

2005-56 2005-33 IRB 318

2005-57 2005-33 IRB 318

2005-58 2005-33 IRB 319

Notices

2005-48 2005-27 IRB 9

2005-49 2005-27 IRB 14

2005-50 2005-27 IRB 14

2005-51 2005-28 IRB 74

2005-52 2005-28 IRB 75

2005-53 2005-32 IRB 263

2005-54 2005-30 IRB 127

2005-55 2005-32 IRB 265

2005-56 2005-32 IRB 266

2005-57 2005-32 IRB 267

2005-58 2005-33 IRB 295


REG-130241-04 2005-27 IRB 18

REG-138362-04 2005-33 IRB 299

Revenue Procedures

2005-35 2005-28 IRB 76

2005-36 2005-28 IRB 78

2005-37 2005-28 IRB 79

2005-38 2005-28 IRB 81

2005-39 2005-28 IRB 82

2005-40 2005-28 IRB 83

2005-41 2005-29 IRB 90

2005-42 2005-30 IRB 128

2005-43 2005-29 IRB 107

2005-44 2005-29 IRB 110

2005-45 2005-30 IRB 141

2005-46 2005-30 IRB 142

2005-47 2005-32 IRB 269

2005-48 2005-32 IRB 271

2005-49 2005-31 IRB 165

2005-50 2005-32 IRB 272

2005-51 2005-33 IRB 296

2005-52 2005-34 IRB 326

2005-53 2005-34 IRB 339


2005-54 2005-34 IRB 353

2005-55 2005-34 IRB 367

2005-56 2005-34 IRB 383

2005-57 2005-34 IRB 392

2005-58 2005-34 IRB 402

2005-59 2005-34 IRB 412

Revenue Rulings

2005-38 2005-27 IRB 6

2005-39 2005-27 IRB 1

2005-40 2005-27 IRB 4

2005-41 2005-28 IRB 69

2005-42 2005-28 IRB 67

2005-43 2005-29 IRB 88

2005-44 2005-29 IRB 87

2005-45 2005-30 IRB 123

2005-46 2005-30 IRB 120

2005-47 2005-32 IRB 261

2005-48 2005-32 IRB 259

2005-49 2005-30 IRB 125

2005-50 2005-30 IRB 124

2005-51 2005-31 IRB 163

2005-54 2005-33 IRB 289

2005-55 2005-33 IRB 284

Tax Conventions

2005-47 2005-28 IRB 71

Treasury Decisions

9208 2005-31 IRB 157

9209 2005-31 IRB 153

9210 2005-33 IRB 290

9211 2005-33 IRB 287





Notices

2005-51


Notice 2005-57 2005-32 IRB 267


REG-142686-01

Withdrawn by

Ann 2005-55 2005-33 IRB 317

REG-100420-03

Corrected by

Ann 2005-57 2005-33 IRB 318

REG-102144-04

Corrected by

Ann 2005-56 2005-33 IRB 318

Revenue Procedures

64-54

Obsoleted by

Rev Rul 2005-43 2005-29 IRB 88

66-33

Obsoleted by

Rev Rul 2005-43 2005-29 IRB 88

69-13

Obsoleted by

Rev Rul 2005-43 2005-29 IRB 88

70-8

Modified by

Rev Proc 2005-46 2005-30 IRB 142

71-1

Obsoleted by

Rev Rul 2005-43 2005-29 IRB 88

72-22

Obsoleted by

Rev Rul 2005-43 2005-29 IRB 88

87-8

Obsoleted by

Rev Proc 2005-44 2005-29 IRB 110

87-9

Obsoleted by

Rev Proc 2005-44 2005-29 IRB 110

89-20

Superseded by

Rev Proc 2005-52 2005-34 IRB 326

90ndash11

Modified by

Rev Proc 2005-40 2005-28 IRB 83


90-30


Rev Proc 2005-54 2005-34 IRB 353


Rev Proc 2005-55 2005-34 IRB 367


Rev Proc 2005-56 2005-34 IRB 383


Rev Proc 2005-58 2005-34 IRB 402


Rev Proc 2005-59 2005-34 IRB 412

90-31


Rev Proc 2005-52 2005-34 IRB 326


Rev Proc 2005-54 2005-34 IRB 353


Rev Proc 2005-55 2005-34 IRB 367


Rev Proc 2005-56 2005-34 IRB 383


Rev Proc 2005-58 2005-34 IRB 402


Rev Proc 2005-59 2005-34 IRB 412

93-22

Obsoleted by

Rev Proc 2005-44 2005-29 IRB 110

98-18

Obsoleted by

Rev Proc 2005-45 2005-30 IRB 141

2000-49

Superseded by

Rev Proc 2005-41 2005-29 IRB 90

2001-16

Superseded by

Rev Proc 2005-42 2005-30 IRB 128

2002-9



2004-50

Superseded by

Rev Proc 2005-49 2005-31 IRB 165

Revenue Rulings

65-109

Obsoleted by

Rev Rul 2005-43 2005-29 IRB 88

68-549

Obsoleted by

Rev Rul 2005-43 2005-29 IRB 88


82-29


Rev Proc 2005-39 2005-28 IRB 82

2005-41

Corrected by

Ann 2005-50 2005-30 IRB 152

Treasury Decisions

9186

Corrected by

Ann 2005-53 2005-31 IRB 258

9206

Corrected by

Ann 2005-49 2005-29 IRB 119

9207

Corrected by

Ann 2005-52 2005-31 IRB 257



Sheet1


2021 50 1075 100000000$

2022 51 333 1075 107500000$ 3003003$ 104496997$

2023 52 323 1075 112334272$ 3235201$ 109099071$

2024 53 313 1075 117281501$ 3485593$ 113795908$

2025 54 303 1075 122330601$ 3755641$ 118574960$

2026 55 293 1075 127468082$ 4046927$ 123421155$

2027 56 283 1075 132677742$ 4361172$ 128316570$

2028 57 273 1075 137940313$ 4700241$ 133240072$

2029 58 263 1075 143233078$ 5066162$ 138166915$

2030 59 253 1075 148529434$ 5461143$ 143068291$

2031 60 243 1075 153798413$ 5887584$ 147910829$

2032 61 233 1075 159004141$ 6348104$ 152656037$

2033 62 223 1075 164105240$ 6845562$ 157259677$

2034 63 213 1075 169054153$ 7383083$ 161671070$

2035 64 203 1075 173796400$ 7964092$ 165832308$

2036 65 193 1075 178269731$ 8592348$ 169677383$

2037 66 183 1075 182403187$ 9271988$ 173131199$

2038 67 173 1075 186116039$ 10007584$ 176108455$

2039 68 163 1075 189316589$ 10804200$ 178512390$

2040 69 153 1075 191900819$ 11667476$ 180233342$

2041 70 143 1075 193750843$ 12603730$ 181147113$

2042 71 133 1075 194733146$ 13620084$ 181113063$

2043 72 123 1075 194696542$ 14724639$ 179971903$

2044 73 113 1075 193469796$ 15926717$ 177543079$

2045 74 103 1075 190858810$ 17237192$ 173621618$

2046 75 93 1075 186643239$ 18668991$ 167974248$

2047 76 83 1075 180572316$ 20237861$ 160334455$

2048 77 73 1075 172359539$ 21963624$ 150395915$

2049 78 63 1075 161675609$ 23872368$ 137803241$

2050 79 53 1075 148138485$ 26000612$ 122137873$

2051 80 43 1075 131298213$ 28404157$ 102894057$

2052 81 33 1075 110611111$ 31180017$ 79431094$

2053 82 23 1075 85388426$ 34535258$ 50853168$

2054 83 13 1075 54667155$ 39117821$ 15549334$

2055 84 03 1075 16715534$ 16715534$ 000$

456695709$

Page 1

Sheet1


139876480$

Page 1







Page 1



9000

1000


Page 2



1 $100000000 $1445328 $5825377 $9719632 $975510732 $97551073 $1409934 $5682718 $9481604 $951621213 $95162121 $1375404 $5543552 $9249408 $928316694 $92831669 $1341722 $5407794 $9022896 $905582895 $90558289 $1308864 $5275361 $8801932 $883405826 $88340582 $1276810 $5146171 $8586380 $861771837 $86177183 $1245542 $5020145 $8376104 $840667668 $84066766 $1215039 $4897206 $8170980 $820080319 $82008031 $1185284 $4777277 $7970876 $7999971610 $79999716 $1156258 $4660285 $7775676 $7804058311 $78040583 $1127942 $4546159 $7585256 $7612942812 $76129428 $1100318 $4434825 $7399500 $7426507113 $74265071 $1073374 $4326220 $7218288 $7244637714 $72446377 $1047087 $4220274 $7041520 $7067221815 $70672218 $1021445 $4116923 $6869080 $6894150616 $68941506 $996431 $4016102 $6700860 $6725317917 $67253179 $972028 $3917751 $6536760 $6560619818 $65606198 $948224 $3821808 $6376680 $6399955019 $63999550 $925003 $3728216 $6220520 $6243224920 $62432249 $902350 $3636913 $6068184 $6090332821 $60903328 $880252 $3547848 $5919580 $5941184822 $59411848 $858695 $3460963 $5774612 $5795689423 $57956894 $837666 $3376207 $5633196 $5653757124 $56537571 $817153 $3293527 $5495244 $5515300725 $55153007 $797142 $3212871 $5360668 $5380235226 $53802352 $777620 $3134189 $5229392 $5248476927 $52484769 $758576 $3057436 $5101324 $5119945728 $51199457 $740000 $2982561 $4976400 $4994561829 $49945618 $721878 $2909520 $4854528 $48722488

Summary $30263369 $121976199 $203517080 $48722488

Page 3

9192021












Page 4


Future Developments

Reminders


Purpose of Form

Who Must File


Definitions


Phone Help




Accounting Methods

When To File

Where To File


Trust Instrument


Attachments


Identification Area

Address


B Type of Entity

D Gross Income













Column (c)



Part VI-A

Part VI-B






Signature






Calculation of NII








Index


toc

INCOME TAX








ESTATE TAX








GIFT TAX




The IRS Mission

Introduction




SECTION 1 PURPOSE


























SECTION 1 PURPOSE

























SECTION 1 PURPOSE




























SECTION 1 PURPOSE




























SECTION 1 PURPOSE























SECTION 1 PURPOSE






















SECTION 1 PURPOSE























SECTION 1 PURPOSE






















Definition of Terms

Abbreviations


Announcements

Notices


Revenue Procedures

Revenue Rulings

Tax Conventions

Treasury Decisions


Notices


Revenue Procedures

Revenue Rulings

Treasury Decisions




(b) C









(c) T


(2) E




(d) D

(1) C








(2) C








(3) E




(4) S

Ifmdash




(e) V Ads by



(f) C




(g) Q

(1) I








(2) E





(3) P










(4) Q




(5) T 5-

(A) In general









(6) T




(7) A

(A) In general



(i) $30000 or




US Code Toolbox



60


ACCESSIBILITY

ABOUT LII

CONTACT US

ADVERTISE HERE

HELP

TERMS OF USE

PRIVACY




AH XSLXML Fileid hellip ionsI52272020AXMLCycle05source (Init amp Date) _______Page 1 of 20 1605 - 19-Nov-2020The type and rule above prints on all proofs including departmental reproduction proofs MUST be removed before printing








Nov 19 2020 Cat No 13228E















of 20 Fileid hellip ionsI52272020AXMLCycle05source 1605 - 19-Nov-2020The type and rule above prints on all proofs including departmental reproduction proofs MUST be removed before printing














CAUTION
















































































































CAUTION









CAUTION

















TIP

TIP









CAUTION


































































year






































5 Total



















Index





Income 14





Worksheet 19


deduction 1


TType of Entity 4




INCOME TAX











ESTATE TAX












GIFT TAX































































SECTION 1 PURPOSE



















































































































































































SECTION 1 PURPOSE























































































































































































SECTION 1 PURPOSE


































































































































































































SECTION 1 PURPOSE





































































































































































































SECTION 1 PURPOSE





































































































































SECTION 1 PURPOSE











































































































































SECTION 1 PURPOSE


















































































































































SECTION 1 PURPOSE



































































































































































Announcements

2005-46 2005-27 IRB 63

2005-47 2005-28 IRB 71

2005-48 2005-29 IRB 111

2005-49 2005-29 IRB 119

2005-50 2005-30 IRB 152

2005-51 2005-32 IRB 283

2005-52 2005-31 IRB 257

2005-53 2005-31 IRB 258

2005-54 2005-32 IRB 283

2005-55 2005-33 IRB 317

2005-56 2005-33 IRB 318

2005-57 2005-33 IRB 318

2005-58 2005-33 IRB 319

Notices

2005-48 2005-27 IRB 9

2005-49 2005-27 IRB 14

2005-50 2005-27 IRB 14

2005-51 2005-28 IRB 74

2005-52 2005-28 IRB 75

2005-53 2005-32 IRB 263

2005-54 2005-30 IRB 127

2005-55 2005-32 IRB 265

2005-56 2005-32 IRB 266

2005-57 2005-32 IRB 267

2005-58 2005-33 IRB 295


REG-130241-04 2005-27 IRB 18

REG-138362-04 2005-33 IRB 299

Revenue Procedures

2005-35 2005-28 IRB 76

2005-36 2005-28 IRB 78

2005-37 2005-28 IRB 79

2005-38 2005-28 IRB 81

2005-39 2005-28 IRB 82

2005-40 2005-28 IRB 83

2005-41 2005-29 IRB 90

2005-42 2005-30 IRB 128

2005-43 2005-29 IRB 107

2005-44 2005-29 IRB 110

2005-45 2005-30 IRB 141

2005-46 2005-30 IRB 142

2005-47 2005-32 IRB 269

2005-48 2005-32 IRB 271

2005-49 2005-31 IRB 165

2005-50 2005-32 IRB 272

2005-51 2005-33 IRB 296

2005-52 2005-34 IRB 326

2005-53 2005-34 IRB 339


2005-54 2005-34 IRB 353

2005-55 2005-34 IRB 367

2005-56 2005-34 IRB 383

2005-57 2005-34 IRB 392

2005-58 2005-34 IRB 402

2005-59 2005-34 IRB 412

Revenue Rulings

2005-38 2005-27 IRB 6

2005-39 2005-27 IRB 1

2005-40 2005-27 IRB 4

2005-41 2005-28 IRB 69

2005-42 2005-28 IRB 67

2005-43 2005-29 IRB 88

2005-44 2005-29 IRB 87

2005-45 2005-30 IRB 123

2005-46 2005-30 IRB 120

2005-47 2005-32 IRB 261

2005-48 2005-32 IRB 259

2005-49 2005-30 IRB 125

2005-50 2005-30 IRB 124

2005-51 2005-31 IRB 163

2005-54 2005-33 IRB 289

2005-55 2005-33 IRB 284

Tax Conventions

2005-47 2005-28 IRB 71

Treasury Decisions

9208 2005-31 IRB 157

9209 2005-31 IRB 153

9210 2005-33 IRB 290

9211 2005-33 IRB 287





Notices

2005-51


Notice 2005-57 2005-32 IRB 267


REG-142686-01

Withdrawn by

Ann 2005-55 2005-33 IRB 317

REG-100420-03

Corrected by

Ann 2005-57 2005-33 IRB 318

REG-102144-04

Corrected by

Ann 2005-56 2005-33 IRB 318

Revenue Procedures

64-54

Obsoleted by

Rev Rul 2005-43 2005-29 IRB 88

66-33

Obsoleted by

Rev Rul 2005-43 2005-29 IRB 88

69-13

Obsoleted by

Rev Rul 2005-43 2005-29 IRB 88

70-8

Modified by

Rev Proc 2005-46 2005-30 IRB 142

71-1

Obsoleted by

Rev Rul 2005-43 2005-29 IRB 88

72-22

Obsoleted by

Rev Rul 2005-43 2005-29 IRB 88

87-8

Obsoleted by

Rev Proc 2005-44 2005-29 IRB 110

87-9

Obsoleted by

Rev Proc 2005-44 2005-29 IRB 110

89-20

Superseded by

Rev Proc 2005-52 2005-34 IRB 326

90ndash11

Modified by

Rev Proc 2005-40 2005-28 IRB 83


90-30


Rev Proc 2005-54 2005-34 IRB 353


Rev Proc 2005-55 2005-34 IRB 367


Rev Proc 2005-56 2005-34 IRB 383


Rev Proc 2005-58 2005-34 IRB 402


Rev Proc 2005-59 2005-34 IRB 412

90-31


Rev Proc 2005-52 2005-34 IRB 326


Rev Proc 2005-54 2005-34 IRB 353


Rev Proc 2005-55 2005-34 IRB 367


Rev Proc 2005-56 2005-34 IRB 383


Rev Proc 2005-58 2005-34 IRB 402


Rev Proc 2005-59 2005-34 IRB 412

93-22

Obsoleted by

Rev Proc 2005-44 2005-29 IRB 110

98-18

Obsoleted by

Rev Proc 2005-45 2005-30 IRB 141

2000-49

Superseded by

Rev Proc 2005-41 2005-29 IRB 90

2001-16

Superseded by

Rev Proc 2005-42 2005-30 IRB 128

2002-9



2004-50

Superseded by

Rev Proc 2005-49 2005-31 IRB 165

Revenue Rulings

65-109

Obsoleted by

Rev Rul 2005-43 2005-29 IRB 88

68-549

Obsoleted by

Rev Rul 2005-43 2005-29 IRB 88


82-29


Rev Proc 2005-39 2005-28 IRB 82

2005-41

Corrected by

Ann 2005-50 2005-30 IRB 152

Treasury Decisions

9186

Corrected by

Ann 2005-53 2005-31 IRB 258

9206

Corrected by

Ann 2005-49 2005-29 IRB 119

9207

Corrected by

Ann 2005-52 2005-31 IRB 257



Sheet1


2021 50 1075 100000000$

2022 51 333 1075 107500000$ 3003003$ 104496997$

2023 52 323 1075 112334272$ 3235201$ 109099071$

2024 53 313 1075 117281501$ 3485593$ 113795908$

2025 54 303 1075 122330601$ 3755641$ 118574960$

2026 55 293 1075 127468082$ 4046927$ 123421155$

2027 56 283 1075 132677742$ 4361172$ 128316570$

2028 57 273 1075 137940313$ 4700241$ 133240072$

2029 58 263 1075 143233078$ 5066162$ 138166915$

2030 59 253 1075 148529434$ 5461143$ 143068291$

2031 60 243 1075 153798413$ 5887584$ 147910829$

2032 61 233 1075 159004141$ 6348104$ 152656037$

2033 62 223 1075 164105240$ 6845562$ 157259677$

2034 63 213 1075 169054153$ 7383083$ 161671070$

2035 64 203 1075 173796400$ 7964092$ 165832308$

2036 65 193 1075 178269731$ 8592348$ 169677383$

2037 66 183 1075 182403187$ 9271988$ 173131199$

2038 67 173 1075 186116039$ 10007584$ 176108455$

2039 68 163 1075 189316589$ 10804200$ 178512390$

2040 69 153 1075 191900819$ 11667476$ 180233342$

2041 70 143 1075 193750843$ 12603730$ 181147113$

2042 71 133 1075 194733146$ 13620084$ 181113063$

2043 72 123 1075 194696542$ 14724639$ 179971903$

2044 73 113 1075 193469796$ 15926717$ 177543079$

2045 74 103 1075 190858810$ 17237192$ 173621618$

2046 75 93 1075 186643239$ 18668991$ 167974248$

2047 76 83 1075 180572316$ 20237861$ 160334455$

2048 77 73 1075 172359539$ 21963624$ 150395915$

2049 78 63 1075 161675609$ 23872368$ 137803241$

2050 79 53 1075 148138485$ 26000612$ 122137873$

2051 80 43 1075 131298213$ 28404157$ 102894057$

2052 81 33 1075 110611111$ 31180017$ 79431094$

2053 82 23 1075 85388426$ 34535258$ 50853168$

2054 83 13 1075 54667155$ 39117821$ 15549334$

2055 84 03 1075 16715534$ 16715534$ 000$

456695709$

Page 1

Sheet1


139876480$

Page 1







Page 1



9000

1000


Page 2



1 $100000000 $1445328 $5825377 $9719632 $975510732 $97551073 $1409934 $5682718 $9481604 $951621213 $95162121 $1375404 $5543552 $9249408 $928316694 $92831669 $1341722 $5407794 $9022896 $905582895 $90558289 $1308864 $5275361 $8801932 $883405826 $88340582 $1276810 $5146171 $8586380 $861771837 $86177183 $1245542 $5020145 $8376104 $840667668 $84066766 $1215039 $4897206 $8170980 $820080319 $82008031 $1185284 $4777277 $7970876 $7999971610 $79999716 $1156258 $4660285 $7775676 $7804058311 $78040583 $1127942 $4546159 $7585256 $7612942812 $76129428 $1100318 $4434825 $7399500 $7426507113 $74265071 $1073374 $4326220 $7218288 $7244637714 $72446377 $1047087 $4220274 $7041520 $7067221815 $70672218 $1021445 $4116923 $6869080 $6894150616 $68941506 $996431 $4016102 $6700860 $6725317917 $67253179 $972028 $3917751 $6536760 $6560619818 $65606198 $948224 $3821808 $6376680 $6399955019 $63999550 $925003 $3728216 $6220520 $6243224920 $62432249 $902350 $3636913 $6068184 $6090332821 $60903328 $880252 $3547848 $5919580 $5941184822 $59411848 $858695 $3460963 $5774612 $5795689423 $57956894 $837666 $3376207 $5633196 $5653757124 $56537571 $817153 $3293527 $5495244 $5515300725 $55153007 $797142 $3212871 $5360668 $5380235226 $53802352 $777620 $3134189 $5229392 $5248476927 $52484769 $758576 $3057436 $5101324 $5119945728 $51199457 $740000 $2982561 $4976400 $4994561829 $49945618 $721878 $2909520 $4854528 $48722488

Summary $30263369 $121976199 $203517080 $48722488

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Page 4


Future Developments

Reminders


Purpose of Form

Who Must File


Definitions


Phone Help




Accounting Methods

When To File

Where To File


Trust Instrument


Attachments


Identification Area

Address


B Type of Entity

D Gross Income













Column (c)



Part VI-A

Part VI-B






Signature






Calculation of NII








Index


toc

INCOME TAX








ESTATE TAX








GIFT TAX




The IRS Mission

Introduction




SECTION 1 PURPOSE


























SECTION 1 PURPOSE

























SECTION 1 PURPOSE




























SECTION 1 PURPOSE




























SECTION 1 PURPOSE























SECTION 1 PURPOSE






















SECTION 1 PURPOSE























SECTION 1 PURPOSE






















Definition of Terms

Abbreviations


Announcements

Notices


Revenue Procedures

Revenue Rulings

Tax Conventions

Treasury Decisions


Notices


Revenue Procedures

Revenue Rulings

Treasury Decisions