Attorney Asks for Guidance on Notice 2010-19

Attorney Asks for Guidance on Notice 2010-19

News story posted in IRS Notices on 19 February 2010| comments
audience: National Publication | last updated: 18 May 2011


Writing on his own behalf and for Martin Hall of Ropes and Gray, LLP, Boston, attorney Lawrence P. Katzenstein of Thompson Coburn LLP, St. Louis, has asked the service to address the gift tax consequences of Notice 2010-19 on transfers to charitable remainder trusts.

Full Text:

February 3, 2010

Ms. Laura Urich Daly
Office of Associate Chief Counsel
(Passthroughs and Special Industries)
Room 4107
1111 Constitution Avenue NW
Washington, DC 20224

    Re: Notice 2010-19

Dear Ms. Daly:

I am writing as you suggested in our telephone discussion yesterday on behalf of myself and Martin Hall of Ropes and Gray, LLP, in Boston. Both of us are active in the charitable community and represent many planned giving programs. I am writing to suggest that in addition to the guidance given in Notice 2010-19, the Service also issue guidance with regard to the application of section 2511(c) to charitable remainder trusts. A charitable remainder trust is not, of course, a grantor trust, so literally section 2511(c) would apply even though the income shifting abuses targeted by section 2511(c) are not possible with a charitable remainder trust. A simple example might be a charitable remainder trust created by A and naming A as primary beneficiary and A's parent B as a successor beneficiary. In a typical two-life charitable remainder trust, the donor would retain a testamentary power to revoke the secondary interest to prevent a present gift for gift tax purposes. Under section 2511(c) as read literally, the donor would be making a gift to the secondary beneficiary in this situation even though no income is being shifting at all: the donor will be taxed on the trust income as provided in Code section 664 during the donor's lifetime, and if the survivorship interest vests, the survivor will be taxed on income paid to the survivor to the extent of section 664. Even in the one-life situation, it is difficult to know how to apply section 2511(c). Is a transfer to a one-life charitable remainder trust for the grantor's own benefit a gift of the entire amount transferred as section 2511(c) seems to say? If deemed a gift to the charitable remainder beneficiary, does the entire transfer qualify for a gift tax charitable deduction even though the actuarial value of the charitable remainder is less than 100%?

We urge you to provide guidance on these issues as soon as possible as Mr. Hall and I are concerned that this uncertainty is delaying implementation of charitable planning. We suggest that the Service promulgate a Notice as soon as possible indicating that section 2511(c) will not apply to transfers to qualified charitable remainder trusts.

Please contact either me or Mr. Hall for further information. He can be reached at (617) 951-7211.

Yours very truly,

Lawrence P. Katzenstein
Thompson Coburn LLP
St. Louis, Missouri

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