Basis in Interests in Tax-Exempt Trusts, 48249-48251 [2015-19846]
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Federal Register / Vol. 80, No. 155 / Wednesday, August 12, 2015 / Rules and Regulations
48249
TABLE II—FEMALES BIRTH TO ATTAINMENT OF AGE 2
[Third percentile values for weight-for-length]
Length
(centimeters)
45.0
45.5
46.5
47.5
48.5
49.5
50.5
51.5
52.5
53.5
54.5
55.5
56.5
57.5
58.5
59.5
60.5
61.5
62.5
63.5
Weight
(kilograms)
..................................................................
..................................................................
..................................................................
..................................................................
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Dated: July 23, 2015.
Carolyn W. Colvin,
Acting Commissioner of Social Security.
BILLING CODE 4191–02–P
Internal Revenue Service
26 CFR Part 1
[TD 9729]
RIN 1545–BJ42
Basis in Interests in Tax-Exempt
Trusts
Internal Revenue Service (IRS),
Treasury.
ACTION: Final regulations.
AGENCY:
This document contains final
regulations that provide rules for
determining a taxable beneficiary’s basis
in a term interest in a charitable
remainder trust (CRT) upon a sale or
other disposition of all interests in the
trust to the extent that basis consists of
a share of adjusted uniform basis. The
final regulations affect taxable
beneficiaries of CRTs.
DATES: Effective date: These final
regulations are effective on August 13,
2015.
Applicability date: These final
regulations apply to sales and other
dispositions of interests in CRTs
occurring on or after January 16, 2014,
except for sales or dispositions
occurring pursuant to a binding
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Jkt 235001
64.5
65.5
66.5
67.5
68.5
69.5
70.5
71.5
72.5
73.5
74.5
75.5
76.5
77.5
78.5
79.5
80.5
81.5
82.5
83.5
Background
DEPARTMENT OF THE TREASURY
VerDate Sep<11>2014
1.613
1.724
1.946
2.171
2.397
2.624
2.852
3.081
3.310
3.538
3.767
3.994
4.220
4.445
4.669
4.892
5.113
5.333
5.552
5.769
Weight
(kilograms)
commitment entered into before January
16, 2014.
FOR FURTHER INFORMATION CONTACT:
Allison R. Carmody at (202) 317–5279
(not a toll-free number).
SUPPLEMENTARY INFORMATION:
[FR Doc. 2015–19825 Filed 8–11–15; 8:45 am]
SUMMARY:
Length
(centimeters)
This document contains amendments
to 26 CFR part 1. On October 31, 2008,
the Treasury Department and the IRS
published Notice 2008–99 (2008–47 IRB
1194) to designate a transaction and
substantially similar transactions as
Transactions of Interest under § 1.6011–
4(b)(6) of the Income Tax Regulations
and to ask for public comments on how
the transactions might be addressed in
published guidance. After studying the
transaction and comments received
from the public in response to Notice
2008–99, the Treasury Department and
the IRS filed a notice of proposed
rulemaking (REG–154890–03) relating to
basis in interests in tax-exempt trusts in
the Federal Register on January 16,
2014. No comments were received from
the public in response to the notice of
proposed rulemaking. No public hearing
was requested or held. The proposed
regulations are adopted without change
by this Treasury decision.
Explanation of Provisions
These final regulations provide a
special rule for determining the basis in
certain CRT term interests in
transactions to which section 1001(e)(3)
applies. Such transactions are those in
which the sale or other disposition of
the CRT term interest is part of a
transaction in which all interests in the
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Length
(centimeters)
5.985
6.200
6.413
6.625
6.836
7.046
7.254
7.461
7.667
7.871
8.075
8.277
8.479
8.679
8.879
9.078
9.277
9.476
9.674
9.872
84.5
85.5
86.5
87.5
88.5
89.5
90.5
91.5
92.5
93.5
94.5
95.5
96.5
97.5
98.5
99.5
100.5
101.5
102.5
103.5
Weight
kilograms)
10.071
10.270
10.469
10.670
10.871
11.074
11.278
11.484
11.691
11.901
12.112
12.326
12.541
12.760
12.981
13.205
13.431
13.661
13.895
14.132
CRT are transferred. In these cases,
these final regulations provide that the
basis of a term interest of a taxable
beneficiary is the portion of the adjusted
uniform basis assignable to that interest
reduced by the portion of the sum of the
following amounts assignable to that
interest: (1) The amount of
undistributed net ordinary income
described in section 664(b)(1); and (2)
the amount of undistributed net capital
gain described in section 664(b)(2).
These final regulations do not affect the
CRT’s basis in its assets but rather are
for the purpose of determining a taxable
beneficiary’s gain arising from a
transaction described in section
1001(e)(3). The rules in these final
regulations are limited in application to
charitable remainder annuity trusts and
charitable remainder unitrusts as
defined in section 664.
Effect on Other Documents
Notice 2008–99 provides that, when
the Treasury Department and the IRS
have gathered enough information to
make an informed decision as to
whether this transaction is a tax
avoidance type of transaction, the
Treasury Department and the IRS may
take one or more actions, including
removing the transaction from the
transactions of interest category in
published guidance, designating the
transaction as a listed transaction, or
providing a new category of reportable
transaction. Because the Treasury
Department and the IRS believe that
these final regulations address the
proper tax treatment of the transaction
described in Notice 2008–99,
E:\FR\FM\12AUR1.SGM
12AUR1
48250
Federal Register / Vol. 80, No. 155 / Wednesday, August 12, 2015 / Rules and Regulations
transactions that are the same as, or
substantially similar to, transactions
described in Notice 2008–99 are no
longer considered ‘‘transactions of
interest,’’ effective for transactions
entered into on or after January 16,
2014. However, the ‘‘transaction of
interest’’ identification for transactions
that are the same as, or substantially
similar to, the transaction described in
Notice 2008–99 continues to apply for
transactions entered into before January
16, 2014, and to transactions entered
into on or after January 16, 2014,
pursuant to a binding commitment
entered into before January 16, 2014.
For example, disclosure and other
obligations under sections 6011, 6111,
and 6112 continue to apply for these
transactions entered into before January
16, 2014, and to transactions entered
into on or after January 16, 2014,
pursuant to a binding commitment
entered into before January 16, 2014.
Effective/Applicability Date
These final regulations apply to sales
and other dispositions of interests in
CRTs occurring on or after January 16,
2014, except for sales or dispositions
occurring pursuant to a binding
commitment entered into before January
16, 2014. However, the fact that a sale
or disposition occurred, or a binding
commitment to complete a sale or
disposition was entered into, before
January 16, 2014, does not preclude the
IRS from applying legal arguments
available to the IRS before issuance of
these final regulations in order to
contest the claimed tax treatment of
such a transaction.
mstockstill on DSK4VPTVN1PROD with RULES
Availability of IRS Documents
The IRS notice cited in this preamble
is published in the Internal Revenue
Bulletin and is available at the IRS Web
site at https://www.irs.gov or the
Superintendent of Documents, U.S.
Government Printing Office,
Washington, DC 20402.
Special Analyses
Certain IRS regulations, including this
one, are exempt from the requirements
of Executive Order 12866, as
supplemented and reaffirmed by
Executive Order 13563. Therefore, a
regulatory impact assessment is not
required. It also has been determined
that section 553(b) of the Administrative
Procedure Act (5 U.S.C. chapter 5) does
not apply to these final regulations, and
the Regulatory Flexibility Act (5 U.S.C.
chapter 6) does not apply to these final
regulations because the final regulations
do not impose a collection of
information on small entities. Therefore,
a Regulatory Flexibility Analysis is not
VerDate Sep<11>2014
18:35 Aug 11, 2015
Jkt 235001
required. Pursuant to section 7805(f) of
the Internal Revenue Code, the notice of
proposed rulemaking preceding this
regulation was submitted to the Chief
Counsel for Advocacy of the Small
Business Administration for comment
on its impact on small business.
Drafting Information
The principal author of these final
regulations is Allison R. Carmody of the
Office of Associate Chief Counsel
(Passthroughs and Special Industries).
Other personnel from the Treasury
Department and the IRS participated in
their development.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and
recordkeeping requirements.
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR part 1 is
amended as follows:
■
PART 1—INCOME TAXES
Paragraph 1. The authority citation
for part 1 continues to read in part as
follows:
■
Authority: 26 U.S.C. 7805 * * *
§ 1.1001–1
[Amended]
Par. 2. Section 1.1001–1, paragraph
(f)(4), is amended by removing the
language ‘‘paragraph (c)’’ and adding
‘‘paragraph (d)’’ in its place.
■ Par. 3. Section 1.1014–5 is amended
by:
■ 1. In paragraph (a)(1), first sentence,
removing the language ‘‘paragraph (b)’’
and adding ‘‘paragraph (b) or (c)’’ in its
place.
■ 2. Redesignating paragraph (c) as
paragraph (d) and adding paragraph (c).
■ 3. In newly redesignated paragraph
(d), adding Example 7 and Example 8.
The additions read as follows:
■
§ 1.1014–5
Gain or loss.
*
*
*
*
*
(c) Sale or other disposition of a term
interest in a tax-exempt trust—(1) In
general. In the case of any sale or other
disposition by a taxable beneficiary of a
term interest (as defined in § 1.1001–
1(f)(2)) in a tax-exempt trust (as defined
in paragraph (c)(2) of this section) to
which section 1001(e)(3) applies, the
taxable beneficiary’s share of adjusted
uniform basis, determined as of (and
immediately before) the sale or
disposition of that interest, is—
(i) That part of the adjusted uniform
basis assignable to the term interest of
the taxable beneficiary under the rules
of paragraph (a) of this section reduced,
but not below zero, by
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(ii) An amount determined by
applying the same actuarial share
applied in paragraph (c)(1)(i) of this
section to the sum of—
(A) The trust’s undistributed net
ordinary income within the meaning of
section 664(b)(1) and § 1.664–
1(d)(1)(ii)(a)(1) for the current and prior
taxable years of the trust, if any; and
(B) The trust’s undistributed net
capital gains within the meaning of
section 664(b)(2) and § 1.664–
1(d)(1)(ii)(a)(2) for the current and prior
taxable years of the trust, if any.
(2) Tax-exempt trust defined. For
purposes of this section, the term taxexempt trust means a charitable
remainder annuity trust or a charitable
remainder unitrust as defined in section
664.
(3) Taxable beneficiary defined. For
purposes of this section, the term
taxable beneficiary means any person
other than an organization described in
section 170(c) or exempt from taxation
under section 501(a).
(4) Effective/applicability date. This
paragraph (c) and paragraph (d)
Example 7 and Example 8 of this
section apply to sales and other
dispositions of interests in tax-exempt
trusts occurring on or after January 16,
2014, except for sales or dispositions
occurring pursuant to a binding
commitment entered into before January
16, 2014.
(d) * * *
Example 7. (a) Grantor creates a charitable
remainder unitrust (CRUT) on Date 1 in
which Grantor retains a unitrust interest and
irrevocably transfers the remainder interest to
Charity. Grantor is an individual taxpayer
subject to income tax. CRUT meets the
requirements of section 664 and is exempt
from income tax.
(b) Grantor’s basis in the shares of X stock
used to fund CRUT is $10x. On Date 2, CRUT
sells the X stock for $100x. The $90x of gain
is exempt from income tax under section
664(c)(1). On Date 3, CRUT uses the $100x
proceeds from its sale of the X stock to
purchase Y stock. On Date 4, CRUT sells the
Y stock for $110x. The $10x of gain on the
sale of the Y stock is exempt from income tax
under section 664(c)(1). On Date 5, CRUT
uses the $110x proceeds from its sale of Y
stock to buy Z stock. On Date 5, CRUT’s basis
in its assets is $110x and CRUT’s total
undistributed net capital gains are $100x.
(c) Later, when the fair market value of
CRUT’s assets is $150x and CRUT has no
undistributed net ordinary income, Grantor
and Charity sell all of their interests in CRUT
to a third person. Grantor receives $100x for
the retained unitrust interest, and Charity
receives $50x for its interest. Because the
entire interest in CRUT is transferred to the
third person, section 1001(e)(3) prevents
section 1001(e)(1) from applying to the
transaction. Therefore, Grantor’s gain on the
sale of the retained unitrust interest in CRUT
is determined under section 1001(a), which
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12AUR1
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Federal Register / Vol. 80, No. 155 / Wednesday, August 12, 2015 / Rules and Regulations
provides that Grantor’s gain on the sale of
that interest is the excess of the amount
realized, $100x, over Grantor’s adjusted basis
in the interest.
(d) Grantor’s adjusted basis in the unitrust
interest in CRUT is that portion of CRUT’s
adjusted uniform basis that is assignable to
Grantor’s interest under § 1.1014–5, which is
Grantor’s actuarial share of the adjusted
uniform basis. In this case, CRUT’s adjusted
uniform basis in its sole asset, the Z stock,
is $110x. However, paragraph (c) of this
section applies to the transaction. Therefore,
Grantor’s actuarial share of CRUT’s adjusted
uniform basis (determined by applying the
factors set forth in the tables contained in
§ 20.2031–7 of this chapter) is reduced by an
amount determined by applying the same
factors to the sum of CRUT’s $0 of
undistributed net ordinary income and its
$100x of undistributed net capital gains.
(e) In determining Charity’s share of the
adjusted uniform basis, Charity applies the
factors set forth in the tables contained in
§ 20.2031–7 of this chapter to the full $110x
of basis.
Example 8. (a) Grantor creates a charitable
remainder annuity trust (CRAT) on Date 1 in
which Grantor retains an annuity interest and
irrevocably transfers the remainder interest to
Charity. Grantor is an individual taxpayer
subject to income tax. CRAT meets the
requirements of section 664 and is exempt
from income tax.
(b) Grantor funds CRAT with shares of X
stock having a basis of $50x. On Date 2,
CRAT sells the X stock for $150x. The $100x
of gain is exempt from income tax under
section 664(c)(1). On Date 3, CRAT
distributes $10x to Grantor, and uses the
remaining $140x of net proceeds from its sale
of the X stock to purchase Y stock. Grantor
treats the $10x distribution as capital gain, so
that CRAT’s remaining undistributed net
capital gains amount described in section
664(b)(2) and § 1.664–1(d) is $90x.
(c) On Date 4, when the fair market value
of CRAT’s assets, which consist entirely of
the Y stock, is still $140x, Grantor and
Charity sell all of their interests in CRAT to
a third person. Grantor receives $126x for the
retained annuity interest, and Charity
receives $14x for its remainder interest.
Because the entire interest in CRAT is
transferred to the third person, section
1001(e)(3) prevents section 1001(e)(1) from
applying to the transaction. Therefore,
Grantor’s gain on the sale of the retained
annuity interest in CRAT is determined
under section 1001(a), which provides that
Grantor’s gain on the sale of that interest is
the excess of the amount realized, $126x,
over Grantor’s adjusted basis in that interest.
(d) Grantor’s adjusted basis in the annuity
interest in CRAT is that portion of CRAT’s
adjusted uniform basis that is assignable to
Grantor’s interest under § 1.1014–5, which is
Grantor’s actuarial share of the adjusted
uniform basis. In this case, CRAT’s adjusted
uniform basis in its sole asset, the Y stock,
is $140x. However, paragraph (c) of this
section applies to the transaction. Therefore,
Grantor’s actuarial share of CRAT’s adjusted
uniform basis (determined by applying the
factors set forth in the tables contained in
§ 20.2031–7 of this chapter) is reduced by an
VerDate Sep<11>2014
18:35 Aug 11, 2015
Jkt 235001
amount determined by applying the same
factors to the sum of CRAT’s $0 of
undistributed net ordinary income and its
$90x of undistributed net capital gains.
(e) In determining Charity’s share of the
adjusted uniform basis, Charity applies the
factors set forth in the tables contained in
§ 20.2031–7 of this chapter to determine its
actuarial share of the full $140x of basis.
John Dalrymple,
Deputy Commissioner for Services and
Enforcement.
Approved: July 13, 2015.
Mark J. Mazur,
Assistant Secretary of the Treasury (Tax
Policy).
[FR Doc. 2015–19846 Filed 8–11–15; 8:45 am]
BILLING CODE 4830–01–P
DEPARTMENT OF HOMELAND
SECURITY
Coast Guard
33 CFR Part 117
[Docket No. USCG–2015–0740]
Drawbridge Operation Regulation;
Trent River, New Bern, NC
Coast Guard, DHS.
Notice of deviation from
drawbridge regulation.
AGENCY:
ACTION:
The Coast Guard has issued a
temporary deviation from the operating
schedule that governs the US 70/Alfred
C. Cunningham Bridge across the Trent
River, mile 0.0, at New Bern, NC. The
deviation is necessary to allow the
participants of the annual Neuse River
Historic New Bern Bike Ride (a two day
event) to safely complete their ride
without interruptions from bridge
openings. This deviation allows the
bridge draw span to remain in the
closed-to-navigation position for one
and a half hours each day to
accommodate the race.
DATES: This deviation is effective from
8 a.m. September 12, 2015 to 9:30 a.m.
on September 13, 2015.
ADDRESSES: The docket for this
deviation, [USCG–2015–0740] is
available at https://www.regulations.gov.
Type the docket number in the
‘‘SEARCH’’ box and click ‘‘SEARCH.’’
Click on Open Docket Folder on the line
associated with this deviation. You may
also visit the Docket Management
Facility in Room W12–140 on the
ground floor of the Department of
Transportation West Building, 1200
New Jersey Avenue SE., Washington,
DC 20590, between 9 a.m. and 5 p.m.,
Monday through Friday, except Federal
holidays.
SUMMARY:
PO 00000
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48251
If
you have questions on this temporary
deviation, call or email Mr. Jim
Rousseau, Coast Guard; telephone (757)
398–6557, email james.l.rousseau2@
uscg.mil. If you have questions on
viewing the docket, call Cheryl Collins,
Program Manager, Docket Operations,
telephone 202–366–9826.
SUPPLEMENTARY INFORMATION: The event
coordinator for the annual Neuse River
Historic New Bern Bike Ride, with
approval from the North Carolina
Department of Transportation, owner of
the drawbridge, has requested a
temporary deviation from the operating
schedule to accommodate the Neuse
River Bridge Historic New Bern Bike
Ride.
The US 70/Alfred C. Cunningham
Bridge operating regulations are set out
in 33 CFR 117.843(a). The US 70/Alfred
C. Cunningham Bridge across the Trent
River, mile 0.0, a double bascule lift
Bridge, in New Bern, NC, has a vertical
clearance in the closed position of 14
feet above mean high water.
Under this temporary deviation, the
drawbridge will be allowed to remain in
the closed-to-navigation position from 8
a.m. to 9:30 a.m. each day on Saturday
and Sunday, September 12 and 13, 2015
while cyclists are participating in the
annual Neuse River Bridge Historic New
Bern Bike Ride.
Under the regular operating schedule
the bridge opens on signal several times
a day for recreational vessels transiting
to and from the local marinas upstream.
During the timeframe for the race the
morning hours have shown the fewest
recorded vessel transits.
Vessels able to pass through the
bridge in the closed position may do so
at any time and are advised to proceed
with caution. The bridge will be able to
open for emergencies and there is no
alternate route for vessels to pass. The
Coast Guard will also inform the users
of the waterways through our Local and
Broadcast Notices to Mariners of the
change in operating schedule for the
bridge so that vessels can arrange their
transits to minimize any impact caused
by the temporary deviation.
In accordance with 33 CFR 117.35(e),
the drawbridge must return to its regular
operating schedule immediately at the
end of the effective period of this
temporary deviation. This deviation
from the operating regulations is
authorized under 33 CFR 117.35.
FOR FURTHER INFORMATION CONTACT:
Dated: August 6, 2015.
Hal R. Pitts,
Bridge Program Manager, Fifth Coast Guard
District.
[FR Doc. 2015–19770 Filed 8–11–15; 8:45 am]
BILLING CODE 9110–04–P
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]]>Agencies
[Federal Register Volume 80, Number 155 (Wednesday, August 12, 2015)]
[Rules and Regulations]
[Pages 48249-48251]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-19846]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 9729]
RIN 1545-BJ42
Basis in Interests in Tax-Exempt Trusts
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final regulations.
-----------------------------------------------------------------------
SUMMARY: This document contains final regulations that provide rules
for determining a taxable beneficiary's basis in a term interest in a
charitable remainder trust (CRT) upon a sale or other disposition of
all interests in the trust to the extent that basis consists of a share
of adjusted uniform basis. The final regulations affect taxable
beneficiaries of CRTs.
DATES: Effective date: These final regulations are effective on August
13, 2015.
Applicability date: These final regulations apply to sales and
other dispositions of interests in CRTs occurring on or after January
16, 2014, except for sales or dispositions occurring pursuant to a
binding commitment entered into before January 16, 2014.
FOR FURTHER INFORMATION CONTACT: Allison R. Carmody at (202) 317-5279
(not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
This document contains amendments to 26 CFR part 1. On October 31,
2008, the Treasury Department and the IRS published Notice 2008-99
(2008-47 IRB 1194) to designate a transaction and substantially similar
transactions as Transactions of Interest under Sec. 1.6011-4(b)(6) of
the Income Tax Regulations and to ask for public comments on how the
transactions might be addressed in published guidance. After studying
the transaction and comments received from the public in response to
Notice 2008-99, the Treasury Department and the IRS filed a notice of
proposed rulemaking (REG-154890-03) relating to basis in interests in
tax-exempt trusts in the Federal Register on January 16, 2014. No
comments were received from the public in response to the notice of
proposed rulemaking. No public hearing was requested or held. The
proposed regulations are adopted without change by this Treasury
decision.
Explanation of Provisions
These final regulations provide a special rule for determining the
basis in certain CRT term interests in transactions to which section
1001(e)(3) applies. Such transactions are those in which the sale or
other disposition of the CRT term interest is part of a transaction in
which all interests in the CRT are transferred. In these cases, these
final regulations provide that the basis of a term interest of a
taxable beneficiary is the portion of the adjusted uniform basis
assignable to that interest reduced by the portion of the sum of the
following amounts assignable to that interest: (1) The amount of
undistributed net ordinary income described in section 664(b)(1); and
(2) the amount of undistributed net capital gain described in section
664(b)(2). These final regulations do not affect the CRT's basis in its
assets but rather are for the purpose of determining a taxable
beneficiary's gain arising from a transaction described in section
1001(e)(3). The rules in these final regulations are limited in
application to charitable remainder annuity trusts and charitable
remainder unitrusts as defined in section 664.
Effect on Other Documents
Notice 2008-99 provides that, when the Treasury Department and the
IRS have gathered enough information to make an informed decision as to
whether this transaction is a tax avoidance type of transaction, the
Treasury Department and the IRS may take one or more actions, including
removing the transaction from the transactions of interest category in
published guidance, designating the transaction as a listed
transaction, or providing a new category of reportable transaction.
Because the Treasury Department and the IRS believe that these final
regulations address the proper tax treatment of the transaction
described in Notice 2008-99,
[[Page 48250]]
transactions that are the same as, or substantially similar to,
transactions described in Notice 2008-99 are no longer considered
``transactions of interest,'' effective for transactions entered into
on or after January 16, 2014. However, the ``transaction of interest''
identification for transactions that are the same as, or substantially
similar to, the transaction described in Notice 2008-99 continues to
apply for transactions entered into before January 16, 2014, and to
transactions entered into on or after January 16, 2014, pursuant to a
binding commitment entered into before January 16, 2014. For example,
disclosure and other obligations under sections 6011, 6111, and 6112
continue to apply for these transactions entered into before January
16, 2014, and to transactions entered into on or after January 16,
2014, pursuant to a binding commitment entered into before January 16,
2014.
Effective/Applicability Date
These final regulations apply to sales and other dispositions of
interests in CRTs occurring on or after January 16, 2014, except for
sales or dispositions occurring pursuant to a binding commitment
entered into before January 16, 2014. However, the fact that a sale or
disposition occurred, or a binding commitment to complete a sale or
disposition was entered into, before January 16, 2014, does not
preclude the IRS from applying legal arguments available to the IRS
before issuance of these final regulations in order to contest the
claimed tax treatment of such a transaction.
Availability of IRS Documents
The IRS notice cited in this preamble is published in the Internal
Revenue Bulletin and is available at the IRS Web site at https://www.irs.gov or the Superintendent of Documents, U.S. Government
Printing Office, Washington, DC 20402.
Special Analyses
Certain IRS regulations, including this one, are exempt from the
requirements of Executive Order 12866, as supplemented and reaffirmed
by Executive Order 13563. Therefore, a regulatory impact assessment is
not required. It also has been determined that section 553(b) of the
Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to
these final regulations, and the Regulatory Flexibility Act (5 U.S.C.
chapter 6) does not apply to these final regulations because the final
regulations do not impose a collection of information on small
entities. Therefore, a Regulatory Flexibility Analysis is not required.
Pursuant to section 7805(f) of the Internal Revenue Code, the notice of
proposed rulemaking preceding this regulation was submitted to the
Chief Counsel for Advocacy of the Small Business Administration for
comment on its impact on small business.
Drafting Information
The principal author of these final regulations is Allison R.
Carmody of the Office of Associate Chief Counsel (Passthroughs and
Special Industries). Other personnel from the Treasury Department and
the IRS participated in their development.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
Adoption of Amendments to the Regulations
0
Accordingly, 26 CFR part 1 is amended as follows:
PART 1--INCOME TAXES
0
Paragraph 1. The authority citation for part 1 continues to read in
part as follows:
Authority: 26 U.S.C. 7805 * * *
Sec. 1.1001-1 [Amended]
0
Par. 2. Section 1.1001-1, paragraph (f)(4), is amended by removing the
language ``paragraph (c)'' and adding ``paragraph (d)'' in its place.
0
Par. 3. Section 1.1014-5 is amended by:
0
1. In paragraph (a)(1), first sentence, removing the language
``paragraph (b)'' and adding ``paragraph (b) or (c)'' in its place.
0
2. Redesignating paragraph (c) as paragraph (d) and adding paragraph
(c).
0
3. In newly redesignated paragraph (d), adding Example 7 and Example 8.
The additions read as follows:
Sec. 1.1014-5 Gain or loss.
* * * * *
(c) Sale or other disposition of a term interest in a tax-exempt
trust--(1) In general. In the case of any sale or other disposition by
a taxable beneficiary of a term interest (as defined in Sec. 1.1001-
1(f)(2)) in a tax-exempt trust (as defined in paragraph (c)(2) of this
section) to which section 1001(e)(3) applies, the taxable beneficiary's
share of adjusted uniform basis, determined as of (and immediately
before) the sale or disposition of that interest, is--
(i) That part of the adjusted uniform basis assignable to the term
interest of the taxable beneficiary under the rules of paragraph (a) of
this section reduced, but not below zero, by
(ii) An amount determined by applying the same actuarial share
applied in paragraph (c)(1)(i) of this section to the sum of--
(A) The trust's undistributed net ordinary income within the
meaning of section 664(b)(1) and Sec. 1.664-1(d)(1)(ii)(a)(1) for the
current and prior taxable years of the trust, if any; and
(B) The trust's undistributed net capital gains within the meaning
of section 664(b)(2) and Sec. 1.664-1(d)(1)(ii)(a)(2) for the current
and prior taxable years of the trust, if any.
(2) Tax-exempt trust defined. For purposes of this section, the
term tax-exempt trust means a charitable remainder annuity trust or a
charitable remainder unitrust as defined in section 664.
(3) Taxable beneficiary defined. For purposes of this section, the
term taxable beneficiary means any person other than an organization
described in section 170(c) or exempt from taxation under section
501(a).
(4) Effective/applicability date. This paragraph (c) and paragraph
(d) Example 7 and Example 8 of this section apply to sales and other
dispositions of interests in tax-exempt trusts occurring on or after
January 16, 2014, except for sales or dispositions occurring pursuant
to a binding commitment entered into before January 16, 2014.
(d) * * *
Example 7. (a) Grantor creates a charitable remainder unitrust
(CRUT) on Date 1 in which Grantor retains a unitrust interest and
irrevocably transfers the remainder interest to Charity. Grantor is
an individual taxpayer subject to income tax. CRUT meets the
requirements of section 664 and is exempt from income tax.
(b) Grantor's basis in the shares of X stock used to fund CRUT
is $10x. On Date 2, CRUT sells the X stock for $100x. The $90x of
gain is exempt from income tax under section 664(c)(1). On Date 3,
CRUT uses the $100x proceeds from its sale of the X stock to
purchase Y stock. On Date 4, CRUT sells the Y stock for $110x. The
$10x of gain on the sale of the Y stock is exempt from income tax
under section 664(c)(1). On Date 5, CRUT uses the $110x proceeds
from its sale of Y stock to buy Z stock. On Date 5, CRUT's basis in
its assets is $110x and CRUT's total undistributed net capital gains
are $100x.
(c) Later, when the fair market value of CRUT's assets is $150x
and CRUT has no undistributed net ordinary income, Grantor and
Charity sell all of their interests in CRUT to a third person.
Grantor receives $100x for the retained unitrust interest, and
Charity receives $50x for its interest. Because the entire interest
in CRUT is transferred to the third person, section 1001(e)(3)
prevents section 1001(e)(1) from applying to the transaction.
Therefore, Grantor's gain on the sale of the retained unitrust
interest in CRUT is determined under section 1001(a), which
[[Page 48251]]
provides that Grantor's gain on the sale of that interest is the
excess of the amount realized, $100x, over Grantor's adjusted basis
in the interest.
(d) Grantor's adjusted basis in the unitrust interest in CRUT is
that portion of CRUT's adjusted uniform basis that is assignable to
Grantor's interest under Sec. 1.1014-5, which is Grantor's
actuarial share of the adjusted uniform basis. In this case, CRUT's
adjusted uniform basis in its sole asset, the Z stock, is $110x.
However, paragraph (c) of this section applies to the transaction.
Therefore, Grantor's actuarial share of CRUT's adjusted uniform
basis (determined by applying the factors set forth in the tables
contained in Sec. 20.2031-7 of this chapter) is reduced by an
amount determined by applying the same factors to the sum of CRUT's
$0 of undistributed net ordinary income and its $100x of
undistributed net capital gains.
(e) In determining Charity's share of the adjusted uniform
basis, Charity applies the factors set forth in the tables contained
in Sec. 20.2031-7 of this chapter to the full $110x of basis.
Example 8. (a) Grantor creates a charitable remainder annuity
trust (CRAT) on Date 1 in which Grantor retains an annuity interest
and irrevocably transfers the remainder interest to Charity. Grantor
is an individual taxpayer subject to income tax. CRAT meets the
requirements of section 664 and is exempt from income tax.
(b) Grantor funds CRAT with shares of X stock having a basis of
$50x. On Date 2, CRAT sells the X stock for $150x. The $100x of gain
is exempt from income tax under section 664(c)(1). On Date 3, CRAT
distributes $10x to Grantor, and uses the remaining $140x of net
proceeds from its sale of the X stock to purchase Y stock. Grantor
treats the $10x distribution as capital gain, so that CRAT's
remaining undistributed net capital gains amount described in
section 664(b)(2) and Sec. 1.664-1(d) is $90x.
(c) On Date 4, when the fair market value of CRAT's assets,
which consist entirely of the Y stock, is still $140x, Grantor and
Charity sell all of their interests in CRAT to a third person.
Grantor receives $126x for the retained annuity interest, and
Charity receives $14x for its remainder interest. Because the entire
interest in CRAT is transferred to the third person, section
1001(e)(3) prevents section 1001(e)(1) from applying to the
transaction. Therefore, Grantor's gain on the sale of the retained
annuity interest in CRAT is determined under section 1001(a), which
provides that Grantor's gain on the sale of that interest is the
excess of the amount realized, $126x, over Grantor's adjusted basis
in that interest.
(d) Grantor's adjusted basis in the annuity interest in CRAT is
that portion of CRAT's adjusted uniform basis that is assignable to
Grantor's interest under Sec. 1.1014-5, which is Grantor's
actuarial share of the adjusted uniform basis. In this case, CRAT's
adjusted uniform basis in its sole asset, the Y stock, is $140x.
However, paragraph (c) of this section applies to the transaction.
Therefore, Grantor's actuarial share of CRAT's adjusted uniform
basis (determined by applying the factors set forth in the tables
contained in Sec. 20.2031-7 of this chapter) is reduced by an
amount determined by applying the same factors to the sum of CRAT's
$0 of undistributed net ordinary income and its $90x of
undistributed net capital gains.
(e) In determining Charity's share of the adjusted uniform
basis, Charity applies the factors set forth in the tables contained
in Sec. 20.2031-7 of this chapter to determine its actuarial share
of the full $140x of basis.
John Dalrymple,
Deputy Commissioner for Services and Enforcement.
Approved: July 13, 2015.
Mark J. Mazur,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2015-19846 Filed 8-11-15; 8:45 am]
BILLING CODE 4830-01-P
