CRT safe harbor for spousal rights extended - waivers not required.
As noted in the May 2, 2005 e-alert (https://tax.aicpa.org/NR/rdonlyres/ 9014F454-5AC6-4A26-B50C-D3AA76ADB726/O/EAlert050205.pdf) and in News Notes, Thorne and Sherr, "Rev. Proc. 2005-24 Requires Spousal Waiver to Avoid CRT Disqualification," TTA, July 2005, p. 385, Rev. Proc. 2005-24 provided a safe-harbor procedure for trusts created after June 28, 2005 that disregarded the right of a spousal election for determining whether the CRAT or CRUT is tax exempt, but only if the spouse irrevocably waived the right of election. For trusts created before June 28, 2005, the revenue procedure (and now Notice 2006-15 for all CRTs, whether created before or after June 28, 2005, until further guidance is issued) states that the IRS will disregard the right of election, even without a waiver, if the spouse does not exercise the right. The AICPA and others told the IRS of Rev. Proc. 2005-24's undue burden on taxpayers and trustees seeking to comply with the safe-harbor rule. They requested a withdrawal of the revenue procedure, an extension of the safe-harbor treatment to all CRTs, and consideration of alternative safe-harbor rules. As a result, the IRS and Treasury are now reconsidering the approach of Rev. Proc. 2005-24 (including the safe-harbor rule), as well as alternative safe-harbor rules.
AICPA Tax Division members with clients owning or interested in CRTs should read the new notice and earlier revenue procedure carefully to identify situations in which they may need to act. The Tax Division's Trust, Estate, and Gift Tax Technical Resource Panel's CRT Task Force continues to analyze the procedure and notice and to discuss the effect of this guidance with the IRS and Treasury.
Eileen Sherr, CPA, MT, AICPA Technical Manager--Taxation, Washington, DC, and Frances Shafer, J.D., KPMG LLP, Washington, DC
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|Title Annotation:||charitable remainder trusts|
|Publication:||The Tax Adviser|
|Date:||May 1, 2006|
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