Tax advisers working with appreciated businesses or investment assets should take note of new final regulations targeting certain charitable remainder annuity trust arrangements. Treasury and the IRS have formally designated specified CRAT transactions, and substantially similar transactions, as listed transactions. The arrangements generally involve transferring appreciated property to a purported CRAT, selling the property inside the trust, purchasing a single-premium immediate annuity and then attempting to use §72 and §664 to avoid recognition of some or all of the gain.

Listed-transaction status brings significant reporting consequences. Participants and material advisers may have disclosure obligations, and failure to disclose can trigger substantial penalties. Practitioners who encounter a CRAT arrangement involving appreciated closely held business interests, business assets or other low-basis property should determine whether the final regulations apply before preparing or signing a return.