TERMINATING CRTSTERMINATING CRTS
David T. Leibell and Daniel L. Daniels, principals in Cummings & Lockwood LLC in Stamford, Conn., report: IRS issues series of rulings ultimately approving CRT termination in unusual circumstances. Did you ever have to make up your mind? Although Lovin' Spoonful sang those lyrics in 1966 they might just as well have been thinking about the Internal Revenue Service 40 years later, given a trio of contradictory
June 1, 2006
Rorie M. Sherman Editor in Chief
David T. Leibell and Daniel L. Daniels, principals in Cummings & Lockwood LLC in Stamford, Conn., report:
IRS issues series of rulings ultimately approving CRT termination in unusual circumstances.
“Did you ever have to make up your mind?” Although Lovin' Spoonful sang those lyrics in 1966 they might just as well have been thinking about the Internal Revenue Service 40 years later, given a trio of contradictory rulings in which the Service granted approval, then withheld approval, then ultimately decided it would grant approval after all, to the termination of a charitable remainder trust (CRT) and the division of the trust's assets between the noncharitable income beneficiary and the charitable remainderman.
In Private Letter Ruling 200525014 (issued June 24, 2005), B and C established a net income with makeup charitable remainder unitrust (NIMCRUT) to pay B and C the lesser of the net income of the trust and 15 percent of the value of the trust assets each year for the lives of B and C. Upon the death of the survivor of B and C, the trust assets were directed to be distributed to a private foundation established by B and C. B and C asked the Service to approve an early termination of the NIMCRUT in which B and C on the one hand, and the private foundation on the other, would receive pro rata shares of the...
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