ACGA Asks IRS to Take Corrective Action on Notice

ACGA Asks IRS to Take Corrective Action on Notice

News story posted in IRS Notices on 9 February 2010| 2 comments
audience: National Publication | last updated: 4 May 2013


Writing on behalf of the American Counsel on Gift Annuities, Conrad Teitell has responded to Notice 2010-19 in which he explains potential unintended and adverse gift tax consequences on transfers to charitable remainder trusts and asks the IRS to immediately issue a corrective notice.

Full Text:

February 5, 2010

Ms. Laura Urich Daly
Office of Associate Chief Counsel
(Passthroughs and Special Industries)
1111 Constitution Avenue NW
Washington, DC 20224

Re: Notice 2010-19

Dear Ms. Daly:

This letter is written by me as counsel to the American Council on Gift Annuities. ACGA, formed in 1927, is an IRC § 501(c)(3) organization described in IRC § 170(b)(1)(A)(vi). ACGA's board of directors and its legal counsel are all unpaid volunteers. ACGA is sponsored by over 1200 social welfare charities, health organizations, environmental organizations, colleges, universities, religious organizations and other charities. American Council on Gift Annuities, 233 McCrea Street, Suite 400, Indianapolis, IN 46225. Phone: (317) 269-6271; Fax: (317) 269-6276; E-mail:

I write to you about the law of unintended consequences and ask that the Service and the Treasury issue a Notice as soon as possible stating that section 2511(c) does not apply to transfers to qualified charitable remainder trusts. Those trusts are crucial for raising the funds essential for ACGA's sponsoring charities to carry out their charitable activities.

A literal reading of section 2511(c) could apply to charitable remainder trusts because those trusts are not grantor trusts. Section 2511(c) was enacted to thwart income shifting. That shifting is not possible with charitable remainder trusts.

Two examples:

  • Ann creates a CRT providing payments to her for life and then payments to her brother, Bob, if he survives her. Typically, Ann reserves the right, exercisable only by her will, to revoke Bob's successor interest. The right is reserved to avoid a gift to Bob for gift tax purposes.

    A literal reading of 2511(c) could result in Ann's making a gift to Bob even though there is absolutely no income shifting. Ann, the donor, will be taxable on the CRT's payments during her life. Bob will receive payments (and be taxable on them as provided in section 664) only if he survives Ann and she doesn't exercise her testamentary right to extinguish Bob's survivorship interest.

  • The CRT is for one life, funded by Ann, to make payments to her, the donor, for life with remainder to charity. Under a literal reading of section 2511(c), it could be said that the entire amount transferred is a gift.

    Is Ann making a gift to herself as well as a gift of the remainder to charity? If Ann would be deemed to make a gift in this situation (not entirely offset by a gift tax charitable deduction), we would have a wacko result. Sorry for the use of the non-legal word "wacko," but I can't think of a word that better describes this possible situation.

I know that the Service and the Treasury are overwhelmed with work, but I ask you to give this issue immediate attention and issue a Notice as soon as possible stating that section 2511(c) does not apply to transfers to qualified charitable remainder trusts.

For the charities who depend on charitable remainder trusts to enable them to carry out their missions, the shadow cast by section 2511(c) is comparable to an automobile manufacturer having vehicles with accelerators that stick and brakes that fail.

Please let me know if you need additional information or amplification.

              • Sincerely,

                Conrad Teitell
                Chairman, Charitable Planning


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It's no surprise that adverse legislation is being enacted under the camouflage of Headline news items. The descriptor

Better than "rubber chicken"

"Accelorators that stick and brakes that fail." This is priceless. I hope someone is reading their mail.

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