With just two revenue rulings, the Internal Revenue Service established the “5 percent exhaustion rule,” which essentially says that if there is a more than 5 percent possibility that a charitable remainder annuity trust (CRAT) will run out of assets and leave nothing to charity, then the donor may not take a charitable deduction for it. The intention behind those rulings is commendable. The IRS should not be in the business of allowing deductions for charitable gifts that will never exist.
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