Internal Revenue Bulletin 2003-31 (PDF rendition): IRS Revenue Procedures

Preserve advance releases and the authoritative Internal Revenue Bulletin rendition; directory timestamps are file-publication metadata, not legal effective dates. HTML bulletins begin June 2003; earlier available issues require full PDF parsing. Whole bulletin rendition: numbered items are identified below; other legal material and publisher context remain included. This is not a new standalone advance release.

Bulletin No. 2003-31
August 4, 2003
HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
INCOME TAX
Rev. Proc. 2003–53, page 230.
Sample inter vivos charitable remainder annuity trust
(CRAT) for one measuring life.This procedure contains a
sample declaration of trust that meets the requirements under
section 664 of the Code and 1.664–2 of the regulations for an
inter vivos charitable remainder annuity trust for one measuring
life. This procedure also contains annotations to the sample
trust and alternate provisions that may be integrated into the
sample trust. Rev. Proc. 89–21 superseded.
Rev. Proc. 2003–54, page 236.
Sample inter vivos charitable remainder annuity trust
(CRAT) for a term of years.This procedure contains a sam-
ple declaration of trust that meets the requirements under sec-
tion 664 of the Code and 1.664–2 of the regulations for an inter
vivos charitable remainder annuity trust with a term of years an-
nuity period. This procedure also contains annotations to the
sample trust and alternate provisions that may be intergrated
into the sample trust.
Rev. Proc. 2003–55, page 242.
Sample inter vivos charitable remainder annuity trust
(CRAT) with consecutive interests for two measuring
lives.This procedure contains a sample declaration of trust
that meets the requirements under section 664 of the Code and
1.664–2 of the regulations for an inter vivos charitable remain-
der annuity trust with consecutive interests for two measuring
lives. This procedure also contains annotations to the sample
trust and alternate provisions that may be integrated into the
sample trust. Section 4 of Rev. Proc. 90–32 superseded.
Rev. Proc. 2003–56, page 249.
Sample inter vivos charitable remainder annuity trust
(CRAT) with concurrent and consecutive interests for
two measuring lives.This procedure contains a sample dec-
laration of trust that meets the requirements under section 664
of the Code and 1.664–2 of the regulations for an inter vivos
charitable remainder annuity trust with concurrent and consec-
utive interests for two measuring lives. This procedure also
contains annotations to the sample trust and alternate provi-
sions that may be integrated into the sample trust. Section 5
of Rev. Proc. 90–32 superseded.
Rev. Proc. 2003–57, page 257.
Sample testamentary charitable remainder annuity
trust (CRAT) for one measuring life.This procedure
contains a sample declaration of trust that meets the require-
ments under section 664 of the Code and 1.664–2 of the
regulations for a testamentary charitable remainder annuity
trust for one measuring life. This procedure also contains
annotations to the sample trust and alternate provisions that
may be integrated into the sample trust. Section 6 of Rev.
Proc. 90–32 superseded.
Rev. Proc. 2003–58, page 262.
Sample testamentary charitable remainder annuity
trust (CRAT) for a term of years.This procedure contains
a sample declaration of trust that meets the requirements
under section 664 of the Code and 1.664–2 of the regulations
for a testamentary charitable remainder annuity trust with a
term of years annuity period. This procedure also contains
annotations to the sample trust and alternate provisions that
may be integrated into the sample trust.
(Continued on the next page)
Announcements of Disbarments and Suspensions begin on page 281.
Finding Lists begin on page ii.
Index for July begins on page iv.

Rev. Proc. 2003–59, page 268.
Sample testamentary charitable remainder annuity
trust (CRAT) with consecutive interests for two mea-
suring lives.This procedure contains a sample declaration
of trust that meets the requirements under section 664 of
the Code and 1.664–2 of the regulations for a testamentary
charitable remainder annuity trust with consecutive interests
for two measuring lives. This procedure also contains anno-
tations to the sample trust and alternate provisions that may
be integrated into the sample trust. Section 7 of Rev. Proc.
90–32 superseded.
Rev. Proc. 2003–60, page 274.
Sample testamentary charitable remainder annuity
trust (CRAT) with concurrent and consecutive interests
for two measuring lives.This procedure contains a sample
declaration of trust that meets the requirements under section
664 of the Code and 1.664–2 of the regulations for a testa-
mentary charitable remainder annuity trust with concurrent
and consecutive interests for two measuring lives. This
procedure also contains annotations to the sample trust and
alternate provisions that may be integrated into the sample
trust. Section 8 of Rev. Proc. 90–32 superseded.
Au
gust 4, 20032003-31 I.R.B.

The IRS Mission
Provide AmericaÊs taxpayers top quality service by helping
them understand and meet their tax responsibilities and by
applying the tax law with integrity and fairness to all.
Introduction
The Internal Revenue Bulletin is the authoritative instrument of
the Commissioner of Internal Revenue for announcing official
rulings and procedures of the Internal Revenue Service and for
publishing Treasury Decisions, Executive Orders, Tax Conven-
tions, legislation, court decisions, and other items of general
interest. It is published weekly and may be obtained from the
Superintendent of Documents on a subscription basis. Bul-
letin contents are consolidated semiannually into Cumulative
Bulletins, which are sold on a single-copy basis.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application of
the tax laws, including all rulings that supersede, revoke, mod-
ify, or amend any of those previously published in the Bulletin.
All published rulings apply retroactively unless otherwise indi-
cated. Procedures relating solely to matters of internal man-
agement are not published; however, statements of internal
practices and procedures that affect the rights and duties of
taxpayers are published.
Revenue rulings represent the conclusions of the Service on the
application of the law to the pivotal facts stated in the revenue
ruling. In those based on positions taken in rulings to taxpayers
or technical advice to Service field offices, identifying details
and information of a confidential nature are deleted to prevent
unwarranted invasions of privacy and to comply with statutory
requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned
against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—1986 Code.
This part includes rulings and decisions based on provisions of
the Internal Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B, Leg-
islation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative Rul-
ings. Bank Secrecy Act Administrative Rulings are issued by
the Department of the TreasuryÊs Office of the Assistant Sec-
retary (Enforcement).
Part IV.—Items of General Interest.
This part includes notices of proposed rulemakings, disbar-
ment and suspension lists, and announcements.
The first Bulletin for each month includes a cumulative index
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and
are published in the first Bulletin of the succeeding semiannual
period, respectively.
The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
For sale by the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402.
20
03-31 I.R.B.August 4, 2003

Part I. Rulings and Decisions Under the Internal Revenue Code of 1986
Section 170.—Charitable,
etc., Contributions and Gifts
26 CFR 1.170A-6: Charitable contributions in trust.
Sample inter vivos CRAT for one measuring
life.This revenue procedure contains a sample dec-
laration of trust that meets the requirements under
section 664 of the Code and 1.664-2 of the Income
Tax Regulations for an inter vivos charitable remain-
der annuity trust for one measuring life. This rev-
enue procedure also contains annotations to the sam-
ple trust and alternate provisions that may be inte-
grated into the sample trust. See Rev. Proc. 2003-
53,
page 230.
Sample inter vivos CRAT for a term of years.
This revenue procedure contains a sample declaration
of trust that meets the requirements under section 664
of the Code and 1.664-2 of the Income Tax Regula-
tions for an inter vivos charitable remainder annuity
trust with a term of years annuity period. This rev-
enue procedure also contains annotations to the sam-
ple trust and alternate provisions that may be inte-
grated into the sample trust. See Rev. Proc. 2003-54,
page 236.
Sample inter vivos CRAT with consecutive in-
terests for two measuring lives.This revenue proce-
dure contains a sample declaration of trust that meets
the requirements under section 664 of the Code and
1.664-2 of the Income Tax Regulations for an inter
vivos charitable remainder annuity trust with consec-
utive interests for two measuring lives. This rev-
enue procedure also contains annotations to the sam-
ple trust and alternate provisions that may be inte-
grated into the sample trust. See Rev. Proc. 2003-55,
page 242.
Sample inter vivos CRAT with concurrent and
consecutive interests for t
wo measuring lives.This
revenue procedure contains a sample declaration of
trust that meets the req
uirements under section 664
of the Code and 1.664-2 of the Income Tax Regu-
lations for an inter v
ivos charitable remainder annu-
ity trust with concurrent and consecutive interests for
two measuring lives
. This revenue procedure also
contains annotations to the sample trust and alter-
nate provisions th
atmaybeintegratedintothesample
trust. See Rev. Proc. 2003-56, page 249.
Sample testamentary CRAT for one measuring
life.This revenue procedure contains a sample dec-
laration of trust that meets the requirements under
section 664 of the Code and 1.664-2 of the Income
Tax Regulations for a testamentary charitable remain-
der annuity trust for one measuring life. This rev-
enue procedure also contains annotations to the sam-
ple trust and alternate provisions that may be inte-
grated into the sample trust. See Rev. Proc. 2003-57,
page 257.
Sample testamentary CRAT for a term of years.
This revenue procedure contains a sample declaration
of trust that meets the requirements under section 664
of the Code and 1.664-2 of the Income Tax Regula-
tions for a testamentary charitable remainder annuity
trust with a term of years annuity period. This rev-
enue procedure also contains annotations to the sam-
ple trust and alternate provisions that may be inte-
grated into the sample trust. See Rev. Proc. 2003-58,
page 262.
Sample testamentary CRAT with consecutive
interests for two measuring lives.This revenue
procedure contains a sample declaration of trus
tthat
meets the requirements under section 664 of the
Code and 1.664-2 of the Income Tax Regulations
for a testamentary charitable remainder annuity trust
with consecutive interests for two measurin
glives.
This revenue procedure also contains annotations to
the sample trust and alternate provisions
that may
be integrated into the sample trust. See Rev. Proc.
2003-59, page 268.
Sample testamentary CRAT with concurrent
and consecutive interests for two measur
ing lives.
This revenue procedure contains a sample declaration
of trust that meets the requireme
nts under section
664 of the Code and 1.664-2 of the Income Tax
Regulations for a testamentar
y charitable remainder
annuity trust with concurrent and consecutive inter-
ests for two measuring lives.
This revenue procedure
also contains annotations to the sample trust and
alternate provisions that m
ay be integrated into the
sample trust. See Rev. Proc. 2003-60, page 274.
Section 664.—Charitable
Remainder Trusts
Sample inter vivos CRAT for
one measuring
life.This revenue procedure contains a sample dec-
laration of trust that
meets the requirements under
section 664 of the Code and 1.664-2 of the Income
Tax Regulations for a
n inter vivos charitable remain-
der annuity trust for one measuring life. This rev-
enue procedure also
contains annotations to the sam-
ple trust and alternate provisions that may be inte-
grated into the sa
mple trust. See Rev. Proc. 2003-53,
page 230.
Sample inter vivos
CRAT for a term of years.
This revenue procedure contains a sample declaration
of trust that mee
ts the requirements under section 664
of the Code and 1.664-2 of the Income Tax Regula-
tions for an in
ter vivos charitable remainder annuity
trust with a term of years annuity period. This rev-
enue procedu
re also contains annotations to the sam-
ple trust and alternate provisions that may be inte-
grated into
the sample trust. See Rev. Proc. 2003-54,
page 236.
Sample inter vivos CRAT with consecutive in-
terests for two measuring lives.This revenue proce-
dure contains a sample declaration of trust that meets
the requirements under section 664 of the Code and
1.664-2 of the Income Tax Regulations for an inter
vivos charitable remainder annuity trust with consec-
utive interests for two measuring lives. This rev-
enue procedure also contains annotations to the sam-
ple trust and alternate provisions that may be inte-
grated into the sample trust. See Rev. Proc. 2003-55,
page 242.
Sample inter vivos CRAT with concurrent and
consecutive interests for two measuring lives.This
revenue procedure contains a sample declaration of
trust that meets the requirements under section 664
of the Code and 1.664-2 of the Income Tax Regu-
lations for an inter vivos charitable remainder annu-
ity trust with concurrent and consecutive interests for
two measuring lives. This revenue procedure also
contains annotations to the sample trust and alter-
nate provisions that may be integrated into the sample
trust. See Rev. Proc. 2003-56, page 249.
Sample testamentary CRAT for one measuring
life.This revenue procedure contains a sample dec-
laration of trust that meets the requirements under
section 664 of the Code and 1.664-2 of the Income
Tax Regulations for a testamentary charitable remain-
der annuity trust for one measuring life. This rev-
enue procedure also contains annotations to the sam-
ple trust and alternate provisions that may be inte-
grated into the sample trust. See Rev. Proc. 2003-57,
page 257.
Sample testamentary CRAT fo
r a term of years.
This revenue procedure contains a sample declaration
of trust that meets the requ
irements under section 664
of the Code and 1.664-2 of the Income Tax Regula-
tions for a testamentary c
haritable remainder annuity
trust with a term of years annuity period. This rev-
enue procedure also c
ontains annotations to the sam-
ple trust and alternate provisions that may be inte-
grated into the sam
ple trust. See Rev. Proc. 2003-58,
page 262.
Sample testamentary CRAT with consecutive
interests for two measuring lives.This revenue
procedure contains a sample declaration of trust that
meets the requirements under section 664 of the
Code and 1.664-2 of the Income Tax Regulations
for a testamentary charitable remainder annuity trust
with consecutive interests for two measuring lives.
This revenue procedure also contains annotations to
the sample trust and alternate provisions that may
be integrated into the sample trust. See Rev. Proc.
2003-59, page 268.
20
03-31 I.R.B.
22
8
Au
gust 4, 2003

Sample testamentary CRAT with concurrent
and consecutive interests for two measuring lives.
This revenue procedure contains a sample declaration
of trust that meets the requirements under section
664 of the Code and 1.664-2 of the Income Tax
Regulations for a testamentary charitable remainder
annuity trust with concurrent and consecutive inter-
ests for two measuring lives. This revenue procedure
also contains annotations to the sample trust and
alternate provisions that may be integrated into the
sample trust. See Rev. Proc. 2003-60, page 274.
Section 2055.—Transfers
for Public, Charitable, and
Religious Uses
26 CFR 20.2055-2: Transfers not exclusively for
charitable purposes.
Sample inter vivos CRAT for one measuring
life.This revenue procedure contains a sample dec-
laration of trust that meets the requirements under
section 664 of the Code and 1.664-2 of the Income
Tax Regulations for an inter vivos charitable remain-
der annuity trust for one measuring life. This rev-
enue procedure also contains annotations to the sam-
ple trust and alternate provisions that may be inte-
grated into the sample trust. See Rev. Proc. 2003-53,
page 230.
Sample inter vivos CRAT for a term of years.
This revenue procedure contains a sample declaration
of trust that meets the requirements under section 664
of the Code and 1.664-2 of the Income Tax Regula-
tions for an inter vivos charitable remainder annuity
trust with a term of years annuity period. This rev-
enue procedure also contains annotations to the sam-
ple trust and alternate provisions that may be inte-
grated into the sample trust. See Rev. Proc. 2003-54,
page 236.
Sample inter vivos CRAT with consecutive in-
terests for two measuring lives.This revenue proce-
dure contains a sample declaration of trust that meets
the requirements under section 664 of the Code and
1.664-2 of the Income Tax Regulations for an inter
vivos charitable remainder annuity trust with consec-
utive interests for two measuring lives. This rev-
enue procedure also contains annotations to the sam-
ple trust and alternate provisions that may be inte-
grated into the sample trust. See Rev. Proc. 2003-55,
page 242.
Sample inter vivos CRAT with concurrent and
consecutive interests for two measuring lives.This
revenue procedure contains a sample declaration of
trust that meets the requirements under section 664
of the Code and 1.664-2 of the Income Tax Regu-
lations for an inter vivos charitable remainder annu-
ity trust with concurrent and consecutive interests for
two measuring lives. This revenue procedure also
contains annotations to the sample trust and alter-
nate provisions that may be integrated into the sample
trust. See Rev. Proc. 2003-56, page 249.
Sample testamentary CRAT for one measuring
life.This revenue procedure contains a sample dec-
laration of trust that meets the requirements under
section 664 of the Code and 1.664-2 of the Income
Tax Regulations for a testamentary charitable remain-
der annuity trust for one measuring life. This rev-
enue procedure also contains annotations to the sam-
ple trust and alternate provisions that may be inte-
grated into the sample trust. See Rev. Proc. 2003-57,
page 257.
Sample testamentary CRAT for a term of years.
This revenue procedure contains a sample declaration
of trust that meets the requirements under section 664
of the Code and 1.664-2 of the Income Tax Regula-
tions for a testamentary charitable remainder annuity
trust with a term of years annuity period. This rev-
enue procedure also contains annotations to the sam-
ple trust and alternate provisions that may be inte-
grated into the sample trust. See Rev. Proc. 2003-58,
page 262.
Sample testamentary CRAT with consecutive
interests for two measuring lives.This revenue
procedure contains a sample declaration of trust that
meets the requirements under section 664 of the
Code and 1.664-2 of the Income Tax Regulations
for a testamentary charitable remainder annuity trust
with consecutive interests for two measuring lives.
This revenue procedure also contains annotations to
the sample trust and alternate provisions that may
be integrated into the sample trust. See Rev. Proc.
2003-59, page 268.
Sample testamentary CRAT with concurrent
and consecutive interests for two measuring lives.
This revenue procedure contains a sample declaration
of trust that meets the requirements under section
664 of the Code and 1.664-2 of the Income Tax
Regulations for a testamentary charitable remainder
annuity trust with concurrent and consecutive inter-
ests for two measuring lives. This revenue procedure
also contains annotations to the sample trust and
alternate provisions that may be integrated into the
sample trust. See Rev. Proc. 2003-60, page 274.
Section 2522.—Charitable
and Similar Gifts
26 CFR 20.2522(c)-3: Transfers not exclusively for
charitable, etc., purposes in the case of gifts made
after July 31, 1969.
Sample inter vivos CRAT for one measuring
life.This revenue procedure contains a sample dec-
laration of trust that meets the requirements under
section 664 of the Code and 1.664-2 of the Income
Tax Regulations for an inter vivos charitable remain-
der annuity trust for one measuring life. This rev-
enue procedure also contains annotations to the sam-
ple trust and alternate provisions that may be inte-
grated into the sample trust. See Rev. Proc. 2003-53,
page 230.
Sample inter vivos CRAT for a term of years.
This revenue procedure contains a sample declaration
of trust that meets the requirements under section 664
of the Code and 1.664-2 of the Income Tax Regula-
tions for an inter vivos charitable remainder annuity
trust with a term of years annuity period. This rev-
enue procedure also contains annotations to the sam-
ple trust and alternate provisions that may be inte-
grated into the sample trust. See Rev. Proc. 2003-54,
page 236.
Sample inter vivos CRAT with consecutive in-
terests for two measuring lives.This revenue proce-
dure contains a sample declaration of trust that meets
the requirements under section 664 of the Code and
1.664-2 of the Income Tax Regulations for an inter
vivos charitable remainder annuity trust with consec-
utive interests for two measuring lives. This rev-
enue procedure also contains annotations to the sam-
ple trust and alternate provisions that may be inte-
grated into the sample trust. See Rev. Proc. 2003-55,
page 242.
Sample inter vivos CRAT with concurrent and
consecutive interests for two measuring lives.This
revenue procedure contains a sample declaration of
trust that meets the requirements under section 664
of the Code and 1.664-2 of the Income Tax Regu-
lations for an inter vivos charitable remainder annu-
ity trust with concurrent and consecutive interests for
two measuring lives. This revenue procedure also
contains annotations to the sample trust and alter-
nate provisions that may be integrated into the sample
trust. See Rev. Proc. 2003-56, page 249.
Au
gust 4, 2003
22
9
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03-31 I.R.B.

Part III. Administrative, Procedural, and Miscellaneous
26 CFR 601.201: Rulings and determination letters.
(Also Part I, §§ 170, 664, 2055, 2522; 1.170A–6, 1.664–2, 20.2055–2, 25.2522(c)–3.)
Rev. Proc. 2003–53
SECTION 1. PURPOSE
This revenue procedure contains an annotated sample declaration of trust and alternate provisions that meet the requirements of
§ 664(d)(1) of the Internal Revenue Code for an inter vivos charitable remainder annuity trust (CRAT) providing for annuity payments
for one measuring life followed by the distribution of trust assets to a charitable remainderman.
SECTION 2. BACKGROUND
Previously, the Internal Revenue Service issued sample trust instruments for certain types of CRATs. The Service is updating the
previously issued samples and issuing new samples for additional types of CRATs; annotations and alternate sample provisions are
included as further guidance. In addition to the sample trust instrument included in this revenue procedure for an inter vivos CRAT
providing for annuity payments for one measuring life, samples are provided in separate revenue procedures for:
(a)an inter vivos CRAT providing for annuity payments for a term of years (see Rev. Proc. 2003–54);
(b)an inter vivos CRAT providing for annuity payments payable consecutively for two measuring lives (see Rev. Proc.
2003–55, superceding section 4 of Rev. Proc. 90–32, 1990–1 C.B. 546);
(c)an inter vivos CRAT providing for annuity payments payable concurrently and consecutively for two measuring lives (see
Rev. Proc. 2003–56, superceding section 5 of Rev. Proc. 90–32);
(d)a testamentary CRAT providing for annuity payments for one measuring life (see Rev. Proc. 2003–57, superceding section
6 of Rev. Proc. 90–32);
(e)a testamentary CRAT providing for annuity payments for a term of years (see Rev. Proc. 2003–58);
(f)a testamentary CRAT providing for annuity payments payable consecutively for two measuring lives (see Rev. Proc.
2003–59, superceding section 7 of Rev. Proc. 90–32); and
(g)a testamentary CRAT providing for annuity payments payable concurrently and consecutively for two measuring lives (see
Rev. Proc. 2003–60, superceding section 8 of Rev. Proc. 90–32).
SECTION 3. SCOPE AND OBJECTIVE
Section 4 of this revenue procedure provides a sample declaration of trust for an inter vivos CRAT with one measuring life that is
created by an individual who is a citizen or resident of the United States. Section 5 of this revenue procedure provides annotations to
the provisions of the sample trust. Section 6 of this revenue procedure provides samples of alternate provisions concerning: (.01) the
statement of the annuity amount as a specific dollar amount; (.02) the payment of part of the annuity to an organization described in
§ 170(c); (.03) a qualified contingency; (.04) the last annuity payment to the recipient; (.05) the restriction of the charitable remainder-
man to a public charity; (.06) a retained right to substitute the charitable remainderman; and (.07) a power of appointment to designate
the charitable remainderman.
For transfers to a qualifying CRAT, as defined in § 664(d)(1), the remainder interest will be deductible by a citizen or resident of
the United States under §§ 170(f)(2)(A), 2055(e)(2)(A), and 2522(c)(2)(A) for income, estate, and gift tax purposes, respectively, if
the other requirements of §§ 170(f)(2)(A), 2055(e)(2)(A), and 2522(c)(2)(A) (that is, the requirements not relating to the provisions
of the governing instrument) are also met. The Service will recognize a trust as a qualified CRAT meeting all of the requirements of
§ 664(d)(1) if the trust operates in a manner consistent with the terms of the trust instrument, if the trust is a valid trust under applicable
local law, and if the trust instrument: (i) is substantially similar to the sample in section 4 of this revenue procedure; or (ii) properly
integrates one or more alternate provisions from section 6 of this revenue procedure into a document substantially similar to the sample
in section 4 of this revenue procedure. A trust instrument that contains substantive provisions in addition to those provided in section
4 of this revenue procedure (other than properly integrated alternate provisions from section 6 of this revenue procedure, or provisions
necessary to establish a valid trust under applicable local law that arenot inconsistent with the applicable federal tax requirements),
or that omits any of the provisions of section 4 of this revenue procedure (unless an alternate provision from section 6 of this revenue
procedure is properly integrated), will not necessarily be disqualified, but neither will that trust be assured of qualification under the
provisions of this revenue procedure. The Service generally will not issue a letter ruling on whether an inter vivos trust created by an
individual and with one measuring life qualifies as a CRAT. The Service, however, generally will issue letter rulings on the effect of
substantive trust provisions, other than those contained in sections 4 and 6 of this revenue procedure, on the qualification of a trust as
a CRAT.
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gust 4, 2003

SECTION 4. SAMPLE INTER VIVOS CHARITABLE REMAINDER ANNUITY TRUST — ONE LIFE
On thisday of, 20__, I,(hereinafter “the Donor”), desiring to establish a chari-
table remainder annuity trust, within the meaning of Rev. Proc. 2003–53 and § 664(d)(1) of the Internal Revenue Code (hereinafter
“the Code”), hereby enter into this trust agreement with
as the initial trustee (hereinafter “the Trustee”). This trust
shall be known as the
Charitable Remainder Annuity Trust.
1.Funding of Trust. The Donor hereby transfers and irrevocably assigns, on the above date, to the Trustee the property described
in Schedule A, and the Trustee accepts the property and agrees to hold, manage, and distribute the property under the terms set forth
in this trust instrument.
2.Payment of Annuity Amount. In each taxable year of the trust during the annuity period, the Trustee shall pay to [permissible
recipient] (hereinafter “the Recipient”) an annuity amount equal to [a number no less than 5 and no more than 50] percent of the
initial net fair market value of all property transferred to the trust, valued as of the above date (that is, the date of the transfer). The
first day of the annuity period shall be the date the property is transferred to the trust and the last day of the annuity period shall be
the date of the Recipient’s death. The annuity amount shall be paid in equal quarterly installments at the end of each calendar quarter
from income, and to the extent income is not sufficient, from principal. Any income of the trust for a taxable year in excess of the
annuity amount shall be added to principal. If the initial net fair market value of the trust assets is incorrectly determined, then within
a reasonable period after the value is finally determined for federal tax purposes, the Trustee shall pay to the Recipient (in the case
of an undervaluation) or receive from the Recipient (in the case of an overvaluation) an amount equal to the difference between the
annuity amount(s) properly payable and the annuity amount(s) actually paid.
3.Proration of Annuity Amount. The Trustee shall prorate the annuity amount on a daily basis for any short taxable year. In the
taxable year of the trust during which the annuity period ends, the Trustee shall prorate the annuity amount on a daily basis for the
number of days of the annuity period in that taxable year.
4.Distribution to Charity. At the termination of the annuity period, the Trustee shall distribute all of the then principal and income
of the trust (other than any amount due the Recipient or the Recipient’s estate under the provisions above) to [designated remain-
derman] (hereinafter “the Charitable Organization”). If the Charitable Organization is not an organization described in §§ 170(c),
2055(a), and 2522(a) of the Code at the time when any principal or income of the trust is to be distributed to it, then the Trustee shall
distribute the then principal and income to one or more organizations described in §§ 170(c), 2055(a), and 2522(a) of the Code as the
Trustee shall select, and in the proportions as the Trustee shall decide, in the Trustee’s sole discretion.
5.Additional Contributions. No additional contributions shall be made to the trust after the initial contribution.
6.Prohibited Transactions. The Trustee shall not engage in any act of self-dealing within the meaning of § 4941(d) of the Code, as
modified by § 4947(a)(2)(A) of the Code, and shall not make any taxable expenditures within the meaning of § 4945(d) of the Code,
as modified by § 4947(a)(2)(A) of the Code.
7.Taxable Year. The taxable year of the trust shall be the calendar year.
8.Governing Law. The operation of the trust shall be governed by the laws of the State of
.How-
ever, the Trustee is prohibited from exercising any power or discretion granted under said laws that would be inconsistent with the
qualification of the trust as a charitable remainder annuity trust under § 664(d)(1) of the Code and the corresponding regulations.
9.Limited Power of Amendment. This trust is irrevocable. However, the Trustee shall have the power, acting alone, to amend the
trust from time to time in any manner required for the sole purpose of ensuring that the trust qualifies and continues to qualify as a
charitable remainder annuity trust within the meaning of § 664(d)(1) of the Code.
10.Investment of Trust Assets. Nothing in this trust instrument shall be construed to restrict the Trustee from investing the trust
assets in a manner that could result in the annual realization of a reasonable amount of income or gain from the sale or disposition of
trust assets.
SECTION 5. ANNOTATIONS REGARDING SAMPLE INTER VIVOS CHARITABLE REMAINDER
ANNUITY TRUST — ONE LIFE
.01 Annotations for Introductory Paragraph and Paragraph 1, Funding of Trust, of the Sample Trust.
(1)Factors concerning qualification of trust. A deduction must be allowable under § 170, § 2055, or § 2522 for property
contributed to the trust. Section 1.664–1(a)(1)(iii)(a) of the Income Tax Regulations. The trust must meet the definition
of and function exclusively as a charitable remainder trust from the creation of the trust. Section 1.664–1(a)(4). Solely for
purposes of § 664, a trust is deemed created at the earliest time that neither the grantor nor any other person is treated as
the owner of the entire trust under subpart E, part 1, subchapter J, chapter 1, subtitle A of the Code (subpart E), but in no
event prior to the time property is first transferred to the trust. Neither the donor nor the donor’s spouse shall be treated
as the owner of the trust under subpart E merely because he or she is named as a recipient of the annuity amount. Section
1.664–1(a)(4). In addition, funding the trust with certain types of assets may disqualify it as a charitable remainder trust.
See § 1.664–1(a)(7) and Rev. Rul. 73–610, 1973–2 C.B. 213.
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(2)Valuation of unmarketable assets. If the trust is funded with unmarketable assets, the initial net fair market value of the
assets must be determined exclusively by an independent trustee, as defined in § 1.664–1(a)(7)(iii), or must be determined
by a current “qualified appraisal” from a “qualified appraiser,” as defined in § 1.170A–13(c)(3) and (c)(5), respectively.
Section 1.664–1(a)(7).
(3)Income tax deductibility limitations. The amount of the charitable deduction for income tax purposes is affected by a number
of factors, including the type of property contributed to thetrust, the type of charity receiving the property, whether the
remainder interest is paid outright to charity or held in further trust, and the donor’s adjusted gross income (with certain
adjustments). See § 170(b) and (e); § 1.170A–8; Rev. Rul. 80–38, 1980–1 C.B. 56; and Rev. Rul. 79–368, 1979–2 C.B.
109. See section 6.05 of this revenue procedure for an alternate provision that restricts the charitable remainderman to a
public charity (as defined therein).
(4)Trustee provisions.Alternate or successor trustees may be designated in the trust instrument. In addition, the trust instru-
ment may contain other administrative provisions relating to the trustee’s duties and powers, as long as the provisions do
not conflict with the rules governing charitable remainder trusts under § 664 and the regulations thereunder.
(5)Identity of donor. For purposes of qualification under this revenue procedure, the donor may be an individual or a husband
and wife. Appropriate adjustments should be made to the introductory paragraph if a husband and wife are the donors.
Terms such as “grantor” or “settlor” may be substituted for “donor.”
.02 Annotations for Paragraph 2, Payment of Annuity Amount, of the Sample Trust.
(1)Permissible recipients. For a CRAT with an annuity period based on the life of one individual, the annuity amount must
generally be paid to that individual and the individual must be living at the time of the creation of the trust. See Rev. Rul.
2002–20, 2002–1 C.B. 794, for situations in which the annuity amount may be paid to a trust for the benefit of an individual
who is financially disabled. An organization described in § 170(c) may receive part, but not all, of the annuity amount.
Section 664(d)(1)(A) and § 1.664–2(a)(3)(i). See section 6.02 of this revenue procedure for an alternate provision that
provides for payment of part of the annuity to an organization described in § 170(c).
(2)Percentage requirements. The sum certain annuity amount must be at least 5 percent and not more than 50 percent of the
initial net fair market value of the assets placed in trust. Section 664(d)(1)(A). Even if the sum certain annuity amount is at
least 5 percent and not more than 50 percent of the initial net fair market value of the assets placed in trust, no deduction will
be allowable under § 2055 or § 2522 if the probability that the trust corpus will be exhausted before the death of the recipient
exceeds 5 percent. Rev. Rul. 77–374, 1977–2 C.B. 329 and Rev. Rul. 70–452, 1970–2 C.B. 199. See §§ 1.7520–3(b)
and 25.7520–3(b) for special rules that may be applicable in valuing interests transferred to CRATs. In addition, the value
(determined under § 7520) of the charitable remainder interestmust be at least 10 percent of the initial net fair market value
of all property placed in the trust. Section 664(d)(1)(D).
(3)Payment of annuity amount in installments. Paragraph 2, Payment of Annuity Amount, of the sample trust specifies that
the annuity amount is to be paid in equal quarterly installments at the end of each quarter. However, the trust instrument
may specify that the annuity amount is to be paid to the recipient annually or in equal or unequal installments throughout
the year. See § 1.664–2(a)(1)(i). The amount of the charitable deduction will be affected by the frequency of payment, by
whether the installments are equal or unequal, and by whether each installment is payable at the beginning or end of the
period. See § 1.664–2(c) and § 20.2031–7(d)(2)(iv).
(4)Payment of annuity amount by close of taxable year. Generally, the annuity amount for any taxable year must be paid before
the close of the taxable year for which it is due. For circumstances under which the annuity amount may be paid within a
reasonable time after the close of the taxable year, see § 1.664–2(a)(1)(i)(a).
(5)Early distributions to charity. The trust instrument may provide that an amount other than the annuity shall be paid (or
may be paid in the discretion of the trustee) to an organization described in § 170(c). If such a distribution is made in kind,
the adjusted basis of the property distributed must be fairly representative of the adjusted basis of the property available for
distribution on the date of distribution. Section 1.664–2(a)(4).
.03 Annotations for Paragraph 3, Proration of Annuity Amount, of the Sample Trust.
(1)Prorating annuity amount. To compute the annuity amount in a short taxable year and in the taxable year in which the
annuity period terminates, see § 1.664–2(a)(1)(iv)(a)and(b), respectively.
(2)Determining annuity amount payable in year of recipient’s death. Paragraph 3, Proration of Annuity Amount, of the sample
trust specifies that the annuity amount shall be prorated on adaily basis. See section 6.04 of this revenue procedure for
an alternate provision that provides for the termination of the annuity amount with the last regular payment preceding the
recipient’s death.
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.04 Annotations for Paragraph 4, Distribution to Charity, of the Sample Trust.
(1)Minimum value of remainder. As noted in section 5.02(2) of this revenue procedure, the value (determined under § 7520)
of the charitable remainder interest is required to be at least 10 percent of the initial net fair market value of all property
placed in the trust. Section 664(d)(1)(D).
(2)Designated remainderman. Any named charitable remainderman must be an organization described in § 170(c) at the time
of the transfer to the charitable remainder annuity trust. See § 664(d)(1)(C). Any named charitable remainderman also must
be an organization described in § 2522(a) to qualify for the gift tax charitable deduction and an organization described in
§ 2055(a) to qualify for the estate tax charitable deduction. See Rev. Rul. 77–385, 1977–2 C.B. 331. If it is determined
a deduction under § 2055(a) will not be necessary in any event, all references to § 2055(a) in the trust instrument may be
deleted. The trust instrument may restrict the charitable remainderman to an organization described in §§ 170(c), 2055(a),
and 2522(a), but grant to a trustee or other person the power to designate the actual charitable remainderman. The gift of
the remainder interest will be incomplete for gift tax purposes if, for example: (i) the donor retains the power to substitute
the charitable remainderman; or (ii) the trust instrument provides the trustee with the power to designate the charitable
remainderman and the donor is not prohibited from serving as trustee. See § 25.2511–2(c). Note, however, that an income
tax charitable deduction is available even if the donor has the authority to substitute the charitable remainderman or the
trustee has the authority to designate the charitable remainderman. Rev. Rul. 68–417, 1968–2 C.B. 103; Rev. Rul. 79–368,
1979–2 C.B. 109. See section 6.06 of this revenue procedure for an alternate provision in which the donor retains the right
to substitute the charitable remainderman. See section 6.07 of this revenue procedure for an alternate provision in which
the recipient is granted a power of appointmentto designate the charitable remainderman.
(3)Multiple remaindermen. The remainder interest may pass to more than one charitable organization as long as each organi-
zation is described in §§ 170(c), 2522(a), and, if needed, § 2055(a). Section 1.664–2(a)(6)(i).
(4)Alternative remaindermen. The trust instrument of a CRAT must provide a means for selecting alternative charitable re-
maindermen in the event the designated organization is not qualified at the time any payments are to be made to it from the
trust. Section 1.664–2(a)(6)(iv).
.05 Annotations for Paragraph 6, Prohibited Transactions, of the Sample Trust.
(1)Payment of the annuity amount. Payment of the annuity amount to the recipient is not considered an act of self-dealing
within the meaning of § 4941(d), as modified by § 4947(a)(2)(A), or a taxable expenditure within the meaning of § 4945(d),
as modified by § 4947(a)(2)(A). Section 53.4947–1(c)(2) of the Foundation and Similar Excise Taxes Regulations.
(2)Prohibitions against certain investments and excess business holdings. Prohibitions against investments that jeopardize
the exempt purpose of the trust for purposes of § 4944, as modified by § 4947(a)(2)(A), and against retaining any excess
business holdings for purposes of § 4943, as modified by § 4947(a)(2)(A), are required if the trust provides for payment of
part of an annuity amount to an organization described in § 170(c) and gift and estate tax charitable deductions are sought
for this interest. See § 4947(b)(3). See section 6.02 of this revenue procedure for an alternate provision that provides for
payment of part of the annuity to an organization described in § 170(c).
(3)Trust to continue in existence for benefit of charity. The governing instrument requirements of § 508(e) must be included
in the trust instrument if, after the termination of the annuity period: (i) the trust instrument provides that the trust shall
continue in existence for the benefit of the charitable remainderman and, as a result, the trust will become subject to the pro-
visions of § 4947(a)(1); and (ii) the trust will be treated as a private foundation within the meaning of § 509(a), as modified
by § 4947(a)(1). Except as provided in paragraph 6 of the sample trust, the trust instrument may limit the application of
the provisions of § 508(e) to the period after the termination of the annuity period when the trust continues in existence for
the benefit of the charitable remainderman. Note that when the trust provides for the trust corpus to be retained, in whole
or in part, in trust for the charitable remainderman, the higher deductibility limitations in § 170(b)(1)(A) for the income tax
charitable deduction will not be available (even if the charitable remainderman is restrictedto a public charity) because the
contribution of the trust corpus is made “for the use of” rather than “to” the charitable remainderman. See § 1.170A–8(b).
SECTION 6. ALTERNATE PROVISIONS FOR SAMPLE INTER VIVOS CHARITABLE
REMAINDER ANNUITY TRUST — ONE LIFE
.01 Annuity Amount Stated as a Specific Dollar Amount.
(1)Explanation. As an alternative to stating the annuity amount as a fraction or percentage of the initial net fair market value
of the assets transferred to the trust, the annuity amount may be stated as a specific dollar amount. Section 1.664–2(a)(1)(ii)
and (iii). In either case, the annuity amount must be not less than 5 percent nor more than 50 percent of the initial net fair
market value of all property placed in trust. Section 664(d)(1)(A).
(2)Instructions for use.
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(a)Replace the first sentence of paragraph 2, Payment of Annuity Amount, of the sample trust with the following sentence:
In each taxable year of the trust during the annuity period, the Trustee shall pay to [permissible recipient](hereinafter
“the Recipient”) an annuity amount equal to [the stated dollar amount].
(b)Delete the last sentence of paragraph 2, Payment of Annuity Amount, of the sample trust concerning the incorrect valu-
ation of trust assets.
.02 Payment of Part of the Annuity to an Organization Described in § 170(c).
(1)Explanation. An organization described in § 170(c) may receive part, but not all, of any annuity amount. Section
664(d)(1)(A). If a gift tax charitable deduction and, if needed, an estate tax charitable deduction are sought for the present
value of the annuity interest passing to a charitable organization, the trust instrument must contain additional provisions.
First, the trust instrument must specify the portion of each annuity payment that is payable to the noncharitable recipient
and to the charitable organization described in §§ 170(c), 2522(a), and, if needed, § 2055(a). Second, the trust instrument
must contain a means for selecting an alternative qualified charitable organization if the designated organization is
not a qualified organization at the time when any annuity amount is to be paid to it. Third, the trust instrument must
contain prohibitions against investments that jeopardize the exempt purpose of the trust for purposes of § 4944, as
modified by § 4947(a)(2)(A), and against retaining any excess business holdings for purposes of § 4943, as modified by
§ 4947(a)(2)(A).
(2)Instructions for use.
(a)Replace paragraph 2, Payment of Annuity Amount, of the sample trust with the following paragraph:
Payment of Annuity Amount. The annuity amount is equal to [a number no less than 5 and no more than 50] percent
of the initial net fair market value of all property transferred to the trust, valued as of the above date (that is, the date
of the transfer). In each taxable year of the trust during the annuity period, the Trustee shall pay [the percentage of
the annuity amount payable to the noncharitable recipient] percent of the annuity amount to [permissible recipient]
(hereinafter “the Recipient”) and [the percentage of the annuity amount payable to the charitable recipient] percent
of the annuity amount to [an organization described in §§ 170(c), 2055(a), and 2522(a) of the Code](hereinafter
“the Charitable Recipient”). The first day of the annuity period shall be the date the property is transferred to the
trust and the last day of the annuity period shall be the date of the Recipient’s death. If the Charitable Recipient is
not an organization described in §§ 170(c), 2055(a), and 2522(a) of the Code at the time when any annuity payment
is to be distributed to it, then the Trustee shall distribute that annuity payment to one or more organizations described
in §§ 170(c), 2055(a), and 2522(a) of the Code as the Trustee shall select, and in the proportions as the Trustee shall
decide, in the Trustee’s sole discretion. The annuity amount shall be paid in equal quarterly installments at the end of
each calendar quarter from income, and to the extent income is not sufficient, from principal. Any income of the trust
for a taxable year in excess of the annuity amount shall be added to principal. If the initial net fair market value of the
trust assets is incorrectly determined, then within a reasonable period after the value is finally determined for federal
tax purposes, the Trustee shall pay to the Recipient and the Charitable Recipient (in the case of an undervaluation)
or receive from the Recipient and the Charitable Recipient (in the case of an overvaluation) an amount equal to the
difference between the annuity amount(s) properly payable and the annuity amount(s) actually paid.
(b)Replace the first parenthetical in paragraph 4, Distribution to Charity, of the sample trust with the following parenthetical:
(other than any amount due the Recipient or the Recipient’s estate and the Charitable Recipient under the provisions
above).
(c)Add the following sentence after the first and only sentence in paragraph 6, Prohibited Transactions, of the sample trust:
The Trustee shall not make any investments that jeopardize the exempt purpose of the trust for purposes of § 4944 of
the Code, as modified by § 4947(a)(2)(A) of the Code, or retain any excess business holdings for purposes of § 4943
of the Code, as modified by § 4947(a)(2)(A) of the Code.
.03 Qualified Contingency.
(1)Explanation. Under § 664(f), payment of the annuity amount may terminate upon the earlier of the occurrence of a qualified
contingency (as defined in § 664(f)(3)) or the death of the recipient. The amount of the charitable deduction, however, will
be determined without regard to a qualified contingency. See § 664(f)(2).
(2)Instruction for use. Replace the second sentence of paragraph 2, Payment of Annuity Amount, of the sample trust with the
following sentence:
The first day of the annuity period shall be the date the property is transferred to the trust and the last day of the annuity
period shall be the date of the Recipient’s death or, if earlier, the date on which occurs the [qualified contingency].
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.04 Last Annuity Payment to the Recipient.
(1)Explanation. As an alternative to prorating the annuity amount in the taxable year of the recipient’s death, payment of the
annuity amount may terminate with the last regular payment preceding the recipient’s death. However, the fact that the
recipient may not receive the last payment shall not be taken into account for purposes of determining the present value of
the remainder interest. Section 1.664–2(a)(5)(i).
(2)Instruction for use. Replace the second sentence of paragraph 3, Proration of Annuity Amount, of the sample trust with the
following sentence:
In the taxable year of the trust during which the annuity period ends, the obligation of the Trustee to pay the annuity
amount shall terminate with the regular quarterly installment next preceding the death of the Recipient.
.05 Restricting the Charitable Remainderman to a Public Charity.
(1)Explanation. The amount of the donor’s income tax charitable deduction is more limited for gifts to certain private foun-
dations than for other charitable organizations. Specifically, charitable organizations described in § 170(c) include private
foundations that are not described in § 170(b)(1)(E). See § 170(b) and Rev. Rul. 79–368, 1979–2 C.B. 109. To avoid
these more restrictive limitations, a donor of an inter vivos CRAT may wish to restrict the charitable remainderman to an
organization that is described in § 170(b)(1)(A) as well as §§ 170(c), 2055(a), and 2522(a) (referred to herein as a “public
charity”).
(2)Instruction for use. To restrict the charitable remainderman to a public charity, each and every time the phrase “an organi-
zation described in §§ 170(c), 2055(a), and 2522(a) of the Code” appears in the sample trust, replace it with the phrase “an
organization described in §§ 170(b)(1)(A), 170(c), 2055(a), and 2522(a) of the Code.”
.06 Retaining the Right to Substitute the Charitable Remainderman.
(1)Explanation. The donor may retain the right to substitute another charitable remainderman for the charitable remainderman
named in the trust instrument. See Rev. Rul. 76–8, 1976–1 C.B. 179. Note, however, that the retention of this right will
cause the gift of the remainder interest to be incomplete for gift tax purposes. See § 25.2511–2(c) and Rev. Rul. 77–275,
1977–2 C.B. 346.
(2)Instruction for use. Insert the following sentence between the first and last sentences of paragraph 4, Distribution to Charity,
of the sample trust:
The Donor reserves the right to designate, at any time and from time to time, in lieu of the Charitable Organization
identified above, one or more organizations described in §§ 170(c), 2055(a), and 2522(a) of the Code as the charitable
remainderman and shall make any such designation by giving written notice to the Trustee.
.07 Power of Appointment to Designate the Charitable Remainderman.
(1)Explanation. The trust instrument may grant the recipient a power of appointment to designate the charitable remainderman.
See Rev. Rul. 76–7, 1976–1 C.B. 179.
(2)Instruction for use. Replace paragraph 4, Distribution to Charity, of the sample trust with the following paragraph:
Distribution to Charity. At the termination of the annuity period, the Trustee shall distribute all of the then principal and
income of the trust (other than any amount due the Recipient or the Recipient’s estate under the provisions above) to one
or more charitable organizations described in §§ 170(c), 2055(a), and 2522(a) of the Code as the Recipient shall appoint
and direct by specific reference to this power of appointmentby inter vivos or testamentary instrument. To the extent
the Recipient fails to effectively exercise the power of appointment, the principal and income not effectively appointed
shall be distributed to one or more organizations described in §§ 170(c), 2055(a), and 2522(a) of the Code as the Trustee
shall select, and in the proportions as the Trustee shall decide, in the Trustee’s sole discretion. If an organization fails
to qualify as an organization described in §§ 170(c), 2055(a), and 2522(a) of the Code at the time when any principal
or income of the trust is to be distributed to it, then the Trustee shall distribute the then principal and income to one
or more organizations described in §§ 170(c), 2055(a), and 2522(a) of the Code as the Trustee shall select, and in the
proportions as the Trustee shall decide, in the Trustee’s sole discretion.
SECTION 7. EFFECT ON OTHER REVENUE PROCEDURES
Rev. Proc. 89–21, 1989–1 C.B. 842, is superseded.
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DRAFTING INFORMATION
The principal authors of this revenue procedure are Karlene M. Lesho and Stephanie N. Bland of the Office of Associate Chief
Counsel (Passthroughs and Special Industries). For further information regarding this revenue procedure, contact Karlene M. Lesho
or Stephanie N. Bland at (202) 622–7830 (not a toll-free call).
26 CFR 601.201: Rulings and determination letters.
(Also Part I, §§ 170, 664, 2055, 2522; 1.170A–6, 1.664–2, 20.2055–2, 25.2522(c)–3.)
Rev. Proc. 2003–54
SECTION 1. PURPOSE
This revenue procedure contains an annotated sample declaration of trust and alternate provisions that meet the requirements of
§ 664(d)(1) of the Internal Revenue Code for an inter vivos charitable remainder annuity trust (CRAT) providing for annuity payments
for a term of years followed by the distribution of trust assets to a charitable remainderman.
SECTION 2. BACKGROUND
Previously, the Internal Revenue Service issued sample trust instruments for certain types of CRATs. The Service is updating the
previously issued samples and issuing new samples for additional types of CRATs; annotations and alternate sample provisions are
included as further guidance. In addition to the sample trust instrument included in this revenue procedure for an inter vivos CRAT
providing for annuity payments for a term of years, samples are provided in separate revenue procedures for:
(a)an inter vivos CRAT providing for annuity payments for one measuring life (see Rev. Proc. 2003–53, superceding Rev.
Proc. 89–21, 1989–1 C.B. 842);
(b)an inter vivos CRAT providing for annuity payments payable consecutively for two measuring lives (see Rev. Proc.
2003–55, superceding section 4 of Rev. Proc. 90–32, 1990–1 C.B. 546);
(c)an inter vivos CRAT providing for annuity payments payable concurrently and consecutively for two measuring lives (see
Rev. Proc. 2003–56, superceding section 5 of Rev. Proc. 90–32);
(d)a testamentary CRAT providing for annuity payments for one measuring life (see Rev. Proc. 2003–57, superceding section
6 of Rev. Proc. 90–32);
(e)a testamentary CRAT providing for annuity payments for a term of years (see Rev. Proc. 2003–58);
(f)a testamentary CRAT providing for annuity payments payable consecutively for two measuring lives (see Rev. Proc.
2003–59, superceding section 7 of Rev. Proc. 90–32); and
(g)a testamentary CRAT providing for annuity payments payable concurrently and consecutively for two measuring lives (see
Rev. Proc. 2003–60, superceding section 8 of Rev. Proc. 90–32).
SECTION 3. SCOPE AND OBJECTIVE
Section 4 of this revenue procedure provides a sample declaration of trust for an inter vivos CRAT that is created by an individual
who is a citizen or resident of the United States and that provides for a term of years annuity period. Section 5 of this revenue procedure
provides annotations to the provisions of the sample trust. Section 6 of this revenue procedure provides samples of alternate provisions
concerning: (.01) the statement of the annuity amount as a specific dollar amount; (.02) the payment of part of the annuity to an
organization described in § 170(c); (.03) the apportionment of the annuity amount among members of a named class in the discretion
of the trustee; (.04) a qualified contingency; (.05) the restriction of the charitable remainderman to a public charity; (.06) a retained
right to substitute the charitable remainderman; and (.07) a power of appointment to designate the charitable remainderman.
For transfers to a qualifying CRAT, as defined in § 664(d)(1), the remainder interest will be deductible by a citizen or resident of
the United States under §§ 170(f)(2)(A), 2055(e)(2)(A), and 2522(c)(2)(A) for income, estate, and gift tax purposes, respectively, if
the other requirements of §§ 170(f)(2)(A), 2055(e)(2)(A), and 2522(c)(2)(A) (that is, the requirements not relating to the provisions
of the governing instrument) are also met. The Service will recognize a trust as a qualified CRAT meeting all of the requirements of
§ 664(d)(1) if the trust operates in a manner consistent with the terms of the trust instrument, if the trust is a valid trust under applicable
local law, and if the trust instrument: (i) is substantially similar to the sample in section 4 of this revenue procedure; or (ii) properly
integrates one or more alternate provisions from section 6 of this revenue procedure into a document substantially similar to the sample
in section 4 of this revenue procedure. A trust instrument that contains substantive provisions in addition to those provided in section
4 of this revenue procedure (other than properly integrated alternate provisions from section 6 of this revenue procedure, or provisions
necessary to establish a valid trust under applicable local law that arenot inconsistent with the applicable federal tax requirements),
or that omits any of the provisions of section 4 of this revenue procedure (unless an alternate provision from section 6 of this revenue
procedure is properly integrated), will not necessarily be disqualified, but neither will that trust be assured of qualification under the
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provisions of this revenue procedure. The Service generally will not issue a letter ruling on whether an inter vivos trust created by an
individual and having a term of years annuity period qualifies as a CRAT. The Service, however, generally will issue letter rulings on
the effect of substantive trust provisions, other than those contained in sections 4 and 6 of this revenue procedure, on the qualification
of a trust as a CRAT.
SECTION 4. SAMPLE INTER VIVOS CHARITABLE REMAINDER ANNUITY TRUST — TERM
OF YEARS
On thisday of,20,I,(hereinafter “the Donor”), desiring to establish a char-
itable remainder annuity trust, within the meaning of Rev. Proc. 2003–54 and § 664(d)(1) of the Internal Revenue Code (hereinafter
“the Code”), hereby enter into this trust agreement with
as the initial trustee (hereinafter “the Trustee”). This trust
shall be known as the
Charitable Remainder Annuity Trust.
1.Funding of Trust. The Donor hereby transfers and irrevocably assigns, on the above date, to the Trustee the property described
in Schedule A, and the Trustee accepts the property and agrees to hold, manage, and distribute the property under the terms set forth
in this trust instrument.
2.Payment of Annuity Amount. In each taxable year of the trust during the annuity period, the Trustee shall pay to [permissible
recipient] (hereinafter “the Recipient”) an annuity amount equal to [a number no less than 5 and no more than 50] percent of the initial
net fair market value of all property transferred to the trust, valued as of the above date (that is, the date of the transfer). The annuity
period is a term of [a number not more than 20] years. The first day of the annuity period shall be the date the property is transferred
to the trust and the last day of the annuity period shall be the day preceding the [ordinal number corresponding to the length of the
annuity period] anniversary of that date. The annuity amount shall be paid in equal quarterly installments at the end of each calendar
quarter from income, and to the extent income is not sufficient, from principal. Any income of the trust for a taxable year in excess
of the annuity amount shall be added to principal. If the initial net fair market value of the trust assets is incorrectly determined, then
within a reasonable period after the value is finally determined for federal tax purposes, the Trusteeshall pay to the Recipient (in the
case of an undervaluation) or receive from the Recipient (in the case of an overvaluation) an amount equal to the difference between
the annuity amount(s) properly payable and the annuity amount(s) actually paid.
3.Proration of Annuity Amount. The Trustee shall prorate the annuity amount on a daily basis for any short taxable year. In the
taxable year of the trust during which the annuity period ends, the Trustee shall prorate the annuity amount on a daily basis for the
number of days of the annuity period in that taxable year.
4.Distribution to Charity. At the termination of the annuity period, the Trustee shall distribute all of the then principal and income
of the trust (other than any amount due the Recipient under the provisions above) to [designated remainderman] (hereinafter “the
Charitable Organization”). If the Charitable Organization is notan organization described in §§ 170(c), 2055(a), and 2522(a) of the
Code at the time when any principal or income of the trust is to be distributed to it, then the Trustee shall distribute the then principal
and income to one or more organizations described in §§ 170(c), 2055(a), and 2522(a) of the Code as the Trustee shall select, and in
the proportions as the Trustee shall decide, in the Trustee’s sole discretion.
5.Additional Contributions. No additional contributions shall be made to the trust after the initial contribution.
6.Prohibited Transactions. The Trustee shall not engage in any act of self-dealing within the meaning of § 4941(d) of the Code, as
modified by § 4947(a)(2)(A) of the Code, and shall not make any taxable expenditures within the meaning of § 4945(d) of the Code,
as modified by § 4947(a)(2)(A) of the Code.
7.Taxable Year. The taxable year of the trust shall be the calendar year.
8.Governing Law. The operation of the trust shall be governed by the laws of the State of
.How-
ever, the Trustee is prohibited from exercising any power or discretion granted under said laws that would be inconsistent with the
qualification of the trust as a charitable remainder annuity trust under § 664(d)(1) of the Code and the corresponding regulations.
9.Limited Power of Amendment. This trust is irrevocable. However, the Trustee shall have the power, acting alone, to amend the
trust from time to time in any manner required for the sole purpose of ensuring that the trust qualifies and continues to qualify as a
charitable remainder annuity trust within the meaning of § 664(d)(1) of the Code.
10.Investment of Trust Assets. Nothing in this trust instrument shall be construed to restrict the Trustee from investing the trust
assets in a manner that could result in the annual realization of a reasonable amount of income or gain from the sale or disposition of
trust assets.
SECTION 5. ANNOTATIONS REGARDING SAMPLE INTER VIVOS CHARITABLE REMAINDER
ANNUITY TRUST — TERM OF YEARS
.01 Annotations for Introductory Paragraph and Paragraph 1, Funding of Trust, of the Sample Trust.
(1)Factors concerning qualification of trust. A deduction must be allowable under § 170, § 2055, or § 2522 for property
contributed to the trust. Section 1.664–1(a)(1)(iii)(a) of the Income Tax Regulations. The trust must meet the definition
of and function exclusively as a charitable remainder trust from the creation of the trust. Section 1.664–1(a)(4). Solely for
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purposes of § 664, a trust is deemed created at the earliest time that neither the grantor nor any other person is treated as
the owner of the entire trust under subpart E, part 1, subchapter J, chapter 1, subtitle A of the Code (subpart E), but in no
event prior to the time property is first transferred to the trust. Neither the donor nor the donor’s spouse shall be treated
as the owner of the trust under subpart E merely because he or she is named as a recipient of the annuity amount. Section
1.664–1(a)(4). In addition, funding the trust with certain types of assets may disqualify it as a charitable remainder trust.
See § 1.664–1(a)(7) and Rev. Rul. 73–610, 1973–2 C.B. 213.
(2)Valuation of unmarketable assets. If the trust is funded with unmarketable assets, the initial net fair market value of the
assets must be determined exclusively by an independent trustee, as defined in § 1.664–1(a)(7)(iii), or must be determined
by a current “qualified appraisal” from a “qualified appraiser,” as defined in § 1.170A–13(c)(3) and (c)(5), respectively.
Section 1.664–1(a)(7).
(3)Income tax deductibility limitations. The amount of the charitable deduction for income tax purposes is affected by a number
of factors, including the type of property contributed to thetrust, the type of charity receiving the property, whether the
remainder interest is paid outright to charity or held in further trust, and the donor’s adjusted gross income (with certain
adjustments). See § 170 (b) and (e); § 1.170A–8; Rev. Rul. 80–38, 1980–1 C.B. 56; and Rev. Rul. 79–368, 1979–2 C.B.
109. See section 6.05 of this revenue procedure for an alternate provision that restricts the charitable remainderman to a
public charity (as defined therein).
(4)Trustee provisions. Alternate or successor trustees may be designated in the trust instrument. In addition, the trust instru-
ment may contain other administrative provisions relating to the trustee’s duties and powers, as long as the provisions do not
conflict with the rules governing charitable remainder trusts under § 664 and the regulations thereunder. Note that certain
powers given to certain persons serving as the trustee may cause the trustee to be treated as the owner of the trust under
subpart E and thus disqualify the trust as a charitable remainder trust. See § 1.664–1(a)(4). See section 6.03 of this revenue
procedure for an alternate provision providing for the apportionment of the annuity amount among members of a named
class in the discretion of the trustee.
(5)Identity of donor. For purposes of qualification under this revenue procedure, the donor may be an individual or a husband
and wife. Appropriate adjustments should be made to the introductory paragraph if a husband and wife are the donors.
Terms such as “grantor” or “settlor” may be substituted for “donor.”
.02 Annotations for Paragraph 2, Payment of Annuity Amount, of the Sample Trust.
(1)Permissible term. The period for which the annuity amount is payable must not exceed 20 years. Section 1.664–2(a)(5)(i).
Thus, for example, the annuity period of a CRAT for a term of 20 years will end on the day preceding the twentieth an-
niversary of the date the trust was created.
(2)Permissible recipients. For a CRAT having a term of years annuity period, the annuity amount must generally be paid to
a named person or persons (within the meaning of § 7701(a)(1)). If the annuity amount is to be paid to an individual or
individuals, all the individuals must be living at the time of the creation of the trust. The annuity amount may be payable to
the estate or heirs of a named recipient who dies prior to theexpiration of the term of years. See Rev. Rul. 74–39, 1974–1
C.B. 156. The annuity amount may be payable to members of a named class and, because the annuity period is for a term
of years, all of the members of the class need not be living or ascertainable at the creation of the trust. An organization
described in § 170(c) may receive part, but not all, of the annuity amount. Section 664(d)(1)(A) and § 1.664–2(a)(3)(i).
See section 6.02 of this revenue procedure for an alternate provision that provides for payment of part of the annuity to an
organization described in § 170(c).
(3)Multiple noncharitable recipients. Generally, if the annuity amount is payable to more than one person, the trust instrument
should describe the interest of each person. See section 6.03 of this revenue procedure for an alternate provision providing
for the apportionment of the annuity amount among members of a named class in the discretion of the trustee.
(4)Percentage requirements. The sum certain annuity amount must be at least 5 percent and not more than 50 percent of the
initial net fair market value of the assets placed in trust. Section 664(d)(1)(A). In addition, the value (determined under
§ 7520) of the charitable remainder interest must be at least 10 percent of the initial net fair market value of all property
placed in the trust. Section 664(d)(1)(D). See §§ 1.7520–3(b) and 25.7520–3(b) for special rules that may be applicable in
valuing interests transferred to CRATs.
(5)Payment of annuity amount in installments. Paragraph 2, Payment of Annuity Amount, of the sample trust specifies that
the annuity amount is to be paid in equal quarterly installments at the end of each quarter. However, the trust instrument
may specify that the annuity amount is to be paid to the recipient annually or in equal or unequal installments throughout
the year. See § 1.664–2(a)(1)(i). The amount of the charitable deduction will be affected by the frequency of payment, by
whether the installments are equal or unequal, and by whether each installment is payable at the beginning or end of the
period. See § 1.664–2(c) and § 20.2031–7(d)(2)(iv).
(6)Payment of annuity amount by close of taxable year. Generally, the annuity amount for any taxable year must be paid before
the close of the taxable year for which it is due. For circumstances under which the annuity amount may be paid within a
reasonable time after the close of the taxable year, see § 1.664–2(a)(1)(i)(a).
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(7)Early distributions to charity. The trust instrument may provide that an amount other than the annuity shall be paid (or
may be paid in the discretion of the trustee) to an organization described in § 170(c). If such a distribution is made in kind,
the adjusted basis of the property distributed must be fairly representative of the adjusted basis of the property available for
distribution on the date of distribution. Section 1.664–2(a)(4).
.03 Annotation for Paragraph 3, Proration of Annuity Amount, of the Sample Trust.
(1)Prorating annuity amount. To compute the annuity amount in a short taxable year and in the taxable year in which the
annuity period terminates, see § 1.664–2(a)(1)(iv)(a)and(b), respectively.
.04 Annotations for Paragraph 4, Distribution to Charity, of the Sample Trust.
(1)Minimum value of remainder. As noted in section 5.02(4) of this revenue procedure, the value (determined under § 7520)
of the charitable remainder interest is required to be at least 10 percent of the initial net fair market value of all property
placed in the trust. Section 664(d)(1)(D).
(2)Designated remainderman. Any named charitable remainderman must be an organization described in § 170(c) at the time
of the transfer to the charitable remainder annuity trust. See § 664(d)(1)(C). Any named charitable remainderman also must
be an organization described in § 2522(a) to qualify for the gift tax charitable deduction and an organization described in
§ 2055(a) to qualify for the estate tax charitable deduction. See Rev. Rul. 77–385, 1977–2 C.B. 331. If it is determined
a deduction under § 2055(a) will not be necessary in any event, all references to § 2055(a) in the trust instrument may be
deleted. The trust instrument may restrict the charitable remainderman to an organization described in §§ 170(c), 2055(a),
and 2522(a), but grant to a trustee or other person the power to designate the actual charitable remainderman. The gift of
the remainder interest will be incomplete for gift tax purposes if, for example: (i) the donor retains the power to substitute
the charitable remainderman; or (ii) the trust instrument provides the trustee with the power to designate the charitable
remainderman and the donor is not prohibited from serving as trustee. See § 25.2511–2(c). Note, however, that an income
tax charitable deduction is available even if the donor has the authority to substitute the charitable remainderman or the
trustee has the authority to designate the charitable remainderman. Rev. Rul. 68–417, 1968–2 C.B. 103; Rev. Rul. 79–368,
1979–2 C.B. 109. See section 6.06 of this revenue procedure for an alternate provision in which the donor retains the right
to substitute the charitable remainderman. See section 6.07 of this revenue procedure for an alternate provision in which
the recipient is granted a power of appointmentto designate the charitable remainderman.
(3)Multiple remaindermen. The remainder interest may pass to more than one charitable organization as long as each organi-
zation is described in §§ 170(c), 2522(a), and, ifneeded, 2055(a). Section 1.664–2(a)(6)(i).
(4)Alternative remaindermen. The trust instrument of a CRAT must provide a means for selecting alternative charitable re-
maindermen in the event the designated organization is not qualified at the time any payments are to be made to it from the
trust. Section 1.664–2(a)(6)(iv).
.05 Annotations for Paragraph 6, Prohibited Transactions, of the Sample Trust.
(1)Payment of the annuity amount. Payment of the annuity amount to the recipient is not considered an act of self-dealing
within the meaning of § 4941(d), as modified by § 4947(a)(2)(A), or a taxable expenditure within the meaning of § 4945(d),
as modified by § 4947(a)(2)(A). Section 53.4947–1(c)(2) of the Foundation and Similar Excise Taxes Regulations.
(2)Prohibitions against certain investments and excess business holdings. Prohibitions against investments that jeopardize
the exempt purpose of the trust for purposes of § 4944, as modified by § 4947(a)(2)(A), and against retaining any excess
business holdings for purposes of § 4943, as modified by § 4947(a)(2)(A), are required if the trust provides for payment of
part of an annuity amount to an organization described in § 170(c) and gift and estate tax charitable deductions are sought
for this interest. See § 4947(b)(3). See section 6.02 of this revenue procedure for an alternate provision that provides for
payment of part of the annuity to an organization described in § 170(c).
(3)Trust to continue in existence for benefit of charity. The governing instrument requirements of § 508(e) must be included
in the trust instrument if, after the termination of the annuity period: (i) the trust instrument provides that the trust shall
continue in existence for the benefit of the charitable remainderman and, as a result, the trust will become subject to the pro-
visions of § 4947(a)(1); and (ii) the trust will be treated as a private foundation within the meaning of § 509(a), as modified
by § 4947(a)(1). Except as provided in paragraph 6 of the sample trust, the trust instrument may limit the application of
the provisions of § 508(e) to the period after the termination of the annuity period when the trust continues in existence for
the benefit of the charitable remainderman. Note that when the trust provides for the trust corpus to be retained, in whole
or in part, in trust for the charitable remainderman, the higher deductibility limitations in § 170(b)(1)(A) for the income tax
charitable deduction will not be available (even if the charitable remainderman is restrictedto a public charity) because the
contribution of the trust corpus is made “for the use of” rather than “to” the charitable remainderman. See § 1.170A–8(b).
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SECTION 6. ALTERNATE PROVISIONS FOR SAMPLE INTER VIVOS CHARITABLE
REMAINDER ANNUITY TRUST — TERM OF YEARS
.01 Annuity Amount Stated as a Specific Dollar Amount.
(1)Explanation. As an alternative to stating the annuity amount as a fraction or percentage of the initial net fair market value
of the assets transferred to the trust, the annuity amount may be stated as a specific dollar amount. Section 1.664–2(a)(1)(ii)
and (iii). In either case, the annuity amount must be not less than 5 percent nor more than 50 percent of the initial net fair
market value of all property placed in trust. Section 664(d)(1)(A).
(2)Instructions for use.
(a)Replace the first sentence of paragraph 2, Payment of Annuity Amount, of the sample trust with the following sentence:
In each taxable year of the trust during the annuity period, the Trustee shall pay to [permissible recipient](hereinafter
“the Recipient”) an annuity amount equal to [the stated dollar amount].
(b)Delete the last sentence of paragraph 2, Payment of Annuity Amount, of the sample trust concerning the incorrect valu-
ation of trust assets.
.02 Payment of Part of the Annuity to an Organization Described in § 170(c).
(1)Explanation. An organization described in § 170(c) may receive part, but not all, of any annuity amount. Section
664(d)(1)(A). If a gift tax charitable deduction and, if needed, an estate tax charitable deduction are sought for the present
value of the annuity interest passing to a charitable organization, the trust instrument must contain additional provisions.
First, the trust instrument must specify the portion of each annuity payment that is payable to the noncharitable recipient
and to the charitable organization described in §§ 170(c), 2522(a), and, if needed, § 2055(a). Second, the trust instrument
must contain a means for selecting an alternative qualified charitable organization if the designated organization is
not a qualified organization at the time when any annuity amount is to be paid to it. Third, the trust instrument must
contain prohibitions against investments that jeopardize the exempt purpose of the trust for purposes of § 4944, as
modified by § 4947(a)(2)(A), and against retaining any excess business holdings for purposes of § 4943, as modified by
§ 4947(a)(2)(A).
(2)Instructions for use.
(a)Replace paragraph 2, Payment of Annuity Amount, of the sample trust with the following paragraph:
Payment of Annuity Amount. The annuity amount is equal to [a number no less than 5 and no more than 50] percent
of the initial net fair market value of all property transferred to the trust, valued as of the above date (that is, the date
of the transfer). In each taxable year of the trust during the annuity period, the Trustee shall pay [the percentage of
the annuity amount payable to the noncharitable recipient] percent of the annuity amount to [permissible recipient]
(hereinafter “the Recipient”) and [the percentage of the annuity amount payable to the charitable recipient] percent
of the annuity amount to [an organization described in §§ 170(c), 2055(a), and 2522(a) of the Code](hereinafter
“the Charitable Recipient”). The annuity period is a term of [not more than 20] years. The first day of the annuity
period shall be the date the property is transferred to the trust and the last day of the annuity period shall be the
day preceding the [ordinal number corresponding to the length of the annuity period] anniversary of that date. If
the Charitable Recipient is not an organization described in §§ 170(c), 2055(a), and 2522(a) of the Code at the time
when any annuity payment is to be distributed to it, then the Trustee shall distribute that annuity payment to one or
more organizations described in §§ 170(c), 2055(a), and 2522(a) of the Code as the Trustee shall select, and in the
proportions as the Trustee shall decide, in the Trustee’s sole discretion. The annuity amount shall be paid in equal
quarterly installments at the end of each calendar quarterfrom income, and to the extent income is not sufficient,
from principal. Any income of the trust for a taxable year in excess of the annuity amount shall be added to principal.
If the initial net fair market value of the trust assets is incorrectly determined, then within a reasonable period after
the value is finally determined for federal tax purposes, the Trustee shall pay to the Recipient and the Charitable
Recipient (in the case of an undervaluation) or receive from the Recipient and the Charitable Recipient (in the case
of an overvaluation) an amount equal to the differencebetween the annuity amount(s) properly payable and the
annuity amount(s) actually paid.
(b)Replace the first parenthetical in paragraph 4, Distribution to Charity, of the sample trust with the following parenthetical:
(other than any amount due the Recipient and the Charitable Recipient under the provisions above).
(c)Add the following sentence after the first and only sentence in paragraph 6, Prohibited Transactions, of the sample trust:
The Trustee shall not make any investments that jeopardize the exempt purpose of the trust for purposes of § 4944 of
the Code, as modified by § 4947(a)(2)(A) of the Code, or retain any excess business holdings for purposes of § 4943
of the Code, as modified by § 4947(a)(2)(A) of the Code.
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.03 Apportionment of the Annuity Amount among Members of a Named Class in the Discretion of the
Trustee.
(1)Explanation. A trust is not a CRAT if any person has the power to alter the amount to be paid to any named person other
than an organization described in § 170(c) if the power would cause any person to be treated as the owner of the trust, or
any portion thereof, if subpart E were applicable to the trust. Section 1.664–2(a)(3)(ii). See Rev. Rul. 77–73, 1977–1 C.B.
175. For example, the donor would not be treated as the owner of any portion of a trust if the power is exercisable solely
by an independent trustee or trustees, provided no person hasthe power to add beneficiaries to the class except to provide
for after-born or after-adopted children. Section 674(c). Trustees are independent for purposes of § 674(c) if none of them
is the donor or the donor’s spouse and if no more than half of them are related or subordinate parties who are subservient
to the wishes of the donor. However, an independent trustee’s discretionary power, exercisable solely by that trustee, to
allocate the annuity amount among the members of a class would cause the trustee to be treated as the owner of all or a
portion of the trust under § 678(a) if the trustee is a member of the class, if the trustee may apply trust income or corpus to
satisfy the trustee’s own legal obligation, or if the trustee actually exercises the power to satisfy a support obligation owed
by the trustee. Therefore, if any trustee is given the discretionary power exercisable solely by that trustee to allocate the
annuity amount among members of a class, the trust instrument must provide that such trustee must be: (i) independent;
(ii) not a member of the recipient class; and (iii) prohibited from applying any part of the annuity payment in satisfaction
of the trustee’s own legal obligation.
(2)Instructions for use.
(a)Add the following sentence to the sample trust:
Any trustee who is authorized in the trustee’s sole discretion to allocate the annuity amount among members of a
Recipient class must be independent within the meaning of section 674(c) of the Code and must not be a member of
the Recipient class.
(b)Replace the first sentence of paragraph 2, Payment of Annuity Amount, of the sample trust with the following three
sentences:
In each taxable year of the trust during the annuity period, the Trustee shall pay to a member or members of a class
of persons comprised of [designated members of class] (hereinafter “the Recipient”) an annuity amount equal to [a
number no less than 5 and no more than 50] percent of the initial net fair market value of all property transferred to
the trust, valued as of the above date (that is, the date of the transfer). The Trustee may pay the annuity amount to
one or more members of the class, in equal or unequal shares, as the Trustee, in the Trustee’s sole discretion, may
from time to time deem advisable. The Trustee may not, however, apply the payment for the Trustee’s own benefit,
or in satisfaction of any support or other legal obligation of the Trustee.
.04 Qualified Contingency.
(1)Explanation. Under § 664(f), payment of the annuity amount may terminate upon the earlier of the occurrence of a qualified
contingency (as defined in § 664(f)(3)) or the expiration of the term of years. The amount of the charitable deduction,
however, will be determined without regard to a qualified contingency. See § 664(f)(2).
(2)Instruction for use. Replace the second and third sentences of paragraph 2, Payment of Annuity Amount, of the sample
trust with the following two sentences, respectively:
The annuity period is a term of [not more than 20] years, unless earlier terminated by the occurrence of [qualified
contingency]. The first day of the annuity period shall be the date the property is transferred to the trust and the last day
of the annuity period shall be the day preceding the [ordinal number corresponding to the length of the annuity period]
anniversary of that date or, if earlier, the date on which occurs the [qualified contingency].
.05 Restricting the Charitable Remainderman to a Public Charity.
(1)Explanation. The amount of the donor’s income tax charitable deduction is more limited for gifts to certain private foun-
dations than for other charitable organizations. Specifically, charitable organizations described in § 170(c) include private
foundations that are not described in § 170(b)(1)(E). See § 170(b) and Rev. Rul. 79–368, 1979–2 C.B. 109. To avoid
these more restrictive limitations, a donor of an inter vivos CRAT may wish to restrict the charitable remainderman to an
organization that is described in § 170(b)(1)(A) as well as §§ 170(c), 2055(a), and 2522(a) (referred to herein as a “public
charity”).
(2)Instruction for use. To restrict the charitable remainderman to a public charity, each and every time the phrase “an organi-
zation described in §§ 170(c), 2055(a), and 2522(a) of the Code” appears in the sample trust, replace it with the phrase “an
organization described in §§ 170(b)(1)(A), 170(c), 2055(a), and 2522(a) of the Code.”
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.06 Retaining the Right to Substitute the Charitable Remainderman.
(1)Explanation. The donor may retain the right to substitute another charitable remainderman for the charitable remainderman
named in the trust instrument. See Rev. Rul. 76–8, 1976–1 C.B. 179. Note, however, that the retention of this right will
cause the gift of the remainder interest to be incomplete for gift tax purposes. See § 25.2511–2(c) and Rev. Rul. 77–275,
1977–2 C.B. 346.
(2)Instruction for use. Insert the following sentence between the first and last sentences of paragraph 4, Distribution to Charity,
of the sample trust:
The Donor reserves the right to designate, at any time and from time to time, in lieu of the Charitable Organization
identified above, one or more organizations described in §§ 170(c), 2055(a), and 2522(a) of the Code as the charitable
remainderman, and shall make any such designation by giving written notice to the Trustee.
.07 Power of Appointment to Designate the Charitable Remainderman.
(1)Explanation. The trust instrument may grant a recipient a power of appointment to designate the charitable remainderman.
See Rev. Rul. 76–7, 1976–1 C.B. 179.
(2)Instruction for use. Replace paragraph 4, Distribution to Charity, of the sample trust with the following paragraph:
Distribution to Charity. At the termination of the annuity period, the Trustee shall distribute all of the then principal
and income of the trust (other than any amount due the Recipient under the provisions above) to one or more charitable
organizations described in §§ 170(c), 2055(a), and 2522(a) of the Code as the Recipient shall appoint and direct by spe-
cific reference to this power of appointment by inter vivos ortestamentary instrument. To the extent the Recipient fails
to effectively exercise the power of appointment, the principal and income not effectively appointed shall be distributed
to one or more organizations described in §§ 170(c), 2055(a), and 2522(a) of the Code as the Trustee shall select, and
in the proportions as the Trustee shall decide, in the Trustee’s sole discretion. If an organization fails to qualify as an
organization described in §§ 170(c), 2055(a), and 2522(a) of the Code at the time when any principal or income of the
trust is to be distributed to it, then the Trustee shall distribute the then principal and income to one or more organizations
described in §§ 170(c), 2055(a), and 2522(a) of the Code as the Trustee shall select, and in the proportions as the Trustee
shall decide, in the Trustee’s sole discretion.
DRAFTING INFORMATION
The principal authors of this revenue procedure are Karlene M. Lesho and Stephanie N. Bland of the Office of Associate Chief
Counsel (Passthroughs and Special Industries). For further information regarding this revenue procedure, contact Karlene M. Lesho
or Stephanie N. Bland at (202) 622–7830 (not a toll-free call).
26 CFR 601.201: Rulings and determination letters.
(Also Part I, §§ 170, 664, 2055, 2522; 1.170A–6, 1.664–2, 20.2055–2, 25.2522(c)–3.)
Rev. Proc. 2003–55
SECTION 1. PURPOSE
This revenue procedure contains an annotated sample declaration of trust and alternate provisions that meet the requirements of
§ 664(d)(1) of the Internal Revenue Code for an inter vivos charitable remainder annuity trust (CRAT) providing for annuity payments
payable consecutively for two measuring lives followed by the distribution of trust assets to a charitable remainderman.
SECTION 2. BACKGROUND
Previously, the Internal Revenue Service issued sample trust instruments for certain types of CRATs. The Service is updating the
previously issued samples and issuing new samples for additional types of CRATs; annotations and alternate sample provisions are
included as further guidance. In addition to the sample trust instrument included in this revenue procedure for an inter vivos CRAT
providing for annuity payments payable consecutively for two measuring lives, samples are provided in separate revenue procedures
for:
(a)an inter vivos CRAT providing for annuity payments for one measuring life (see Rev. Proc. 2003–53, superceding Rev.
Proc. 89–21, 1989–1 C.B. 842);
(b)an inter vivos CRAT providing for annuity payments for a term of years (see Rev. Proc. 2003–54);
(c)an inter vivos CRAT providing for annuity payments payable concurrently and consecutively for two measuring lives (see
Rev. Proc. 2003–56, superceding section 5 of Rev. Proc. 90–32, 1990–1 C.B. 546);
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(d)a testamentary CRAT providing for annuity payments for one measuring life (see Rev. Proc. 2003–57, superceding section
6 of Rev. Proc. 90–32);
(e)a testamentary CRAT providing for annuity payments for a term of years (see Rev. Proc. 2003–58);
(f)a testamentary CRAT providing for annuity payments payable consecutively for two measuring lives (see Rev. Proc.
2003–59, superceding section 7 of Rev. Proc. 90–32); and
(g)a testamentary CRAT providing for annuity payments payable concurrently and consecutively for two measuring lives (see
Rev. Proc. 2003–60, superceding section 8 of Rev. Proc. 90–32).
SECTION 3. SCOPE AND OBJECTIVE
Section 4 of this revenue procedure provides a sample declaration of trust for an inter vivos CRAT with consecutive interests for two
measuring lives that is created by an individual who is a citizen or resident of the United States. Section 5 of this revenue procedure
provides annotations to the provisions of the sample trust. Section 6 of this revenue procedure provides samples of alternate provisions
concerning: (.01) the statement of the annuity amount as a specific dollar amount; (.02) the payment of part of the annuity to an
organization described in § 170(c); (.03) a qualified contingency; (.04)the retained right to revoke the interest of the survivor recipient;
(.05) the last annuity payments to the recipients; (.06) the restriction of the charitable remainderman to a public charity; (.07) the
retained right to substitute the charitable remainderman; and (.08) a power of appointment to designate the charitable remainderman.
For transfers to a qualifying CRAT, as defined in § 664(d)(1), the remainder interest will be deductible by a citizen or resident of
the United States under §§ 170(f)(2)(A), 2055(e)(2)(A), and 2522(c)(2)(A) for income, estate, and gift tax purposes, respectively, if
the other requirements of §§ 170(f)(2)(A), 2055(e)(2)(A), and 2522(c)(2)(A) (that is, the requirements not relating to the provisions
of the governing instrument) are also met. The Service will recognize a trust as a qualified CRAT meeting all of the requirements of
§ 664(d)(1) if the trust operates in a manner consistent with the terms of the trust instrument, if the trust is a valid trust under applicable
local law, and if the trust instrument: (i) is substantially similar to the sample in section 4 of this revenue procedure; or (ii) properly
integrates one or more alternate provisions from section 6 of this revenue procedure into a document substantially similar to the sample
in section 4 of this revenue procedure. A trust instrument that contains substantive provisions in addition to those provided in section
4 of this revenue procedure (other than properly integrated alternate provisions from section 6 of this revenue procedure, or provisions
necessary to establish a valid trust under applicable local law that arenot inconsistent with the applicable federal tax requirements),
or that omits any of the provisions of section 4 of this revenue procedure (unless an alternate provision from section 6 of this revenue
procedure is properly integrated), will not necessarily be disqualified, but neither will that trust be assured of qualification under the
provisions of this revenue procedure. The Service generally will not issue a letter ruling on whether an inter vivos trust created by
an individual and with consecutive interests for two measuring lives qualifies as a CRAT. The Service, however, generally will issue
letter rulings on the effect of substantive trust provisions, other than those contained in sections 4 and 6 of this revenue procedure, on
the qualification of a trust as a CRAT.
SECTION 4. SAMPLE INTER VIVOS CHARITABLE REMAINDER ANNUITY TRUST — TWO
LIVES, CONSECUTIVE INTERESTS
On thisday of,20,I,(hereinafter “the Donor”), desiring to establish a char-
itable remainder annuity trust, within the meaning of Rev. Proc. 2003–55 and § 664(d)(1) of the Internal Revenue Code (hereinafter
“the Code”), hereby enter into this trust agreement with
as the initial trustee (hereinafter “the Trustee”). This trust
shall be known as the
Charitable Remainder Annuity Trust.
1.Funding of Trust. The Donor hereby transfers and irrevocably assigns, on the above date, to the Trustee the property described
in Schedule A, and the Trustee accepts the property and agrees to hold, manage, and distribute the property under the terms set forth
in this trust instrument.
2.Payment of Annuity Amount. In each taxable year of the trust during the annuity period, the Trustee shall pay to [permissible
recipient] (hereinafter “the Initial Recipient”) until the Initial Recipient’s death, and thereafter to [permissible recipient](hereinafter
“the Successor Recipient”) (subject to any proration in paragraph 4), an annuity amount equal to [a number no less than 5 and no
more than 50] percent of the initial net fair market value of all property transferred to the trust, valued as of the above date (that is, the
date of the transfer). The first day of the annuity period shall be the date the property is transferred to the trust and the last day of the
annuity period shall be the date of the death of the survivor of the Initial Recipient and the Successor Recipient. The annuity amount
shall be paid in equal quarterly installments at the end of each calendar quarter from income, and to the extent income is not sufficient,
from principal. Any income of the trust for a taxable year in excess of the annuity amount shall be added to principal. If the initial
net fair market value of the trust assets is incorrectly determined, then within a reasonable period after the value is finally determined
for federal tax purposes, the Trustee shall pay to the Initial Recipient and/or Successor Recipient (in the case of an undervaluation)
or receive from the Initial Recipient and/or Successor Recipient (in the case of an overvaluation) an amount equal to the difference
between the annuity amount(s) properly payable and the annuity amount(s) actually paid.
3.Payment of Federal Estate Taxes and State Death Taxes. The lifetime annuity interest of the Successor Recipient will take effect
upon the death of the Initial Recipient only if the Successor Recipient furnishes the funds for payment of any federal estate taxes and
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state death taxes for which the Trustee may be liable upon the death of the Initial Recipient. If the funds are not furnished by the
Successor Recipient, the annuity period shall terminate on the death of the Initial Recipient, notwithstanding any other provision in
this instrument to the contrary.
4.Proration of Annuity Amount. The Trustee shall prorate the annuity amount on a daily basis for any short taxable year. If the
Successor Recipient survives the Initial Recipient, the Trustee shall prorate on a daily basis the next regular annuity payment due after
the death of the Initial Recipient between the estate of the Initial Recipient and the Successor Recipient. In the taxable year of the
trust during which the annuity period ends, the Trustee shall prorate the annuity amount on a daily basis for the number of days of the
annuity period in that taxable year.
5.Distribution to Charity. At the termination of the annuity period, the Trustee shall distribute all of the then principal and income
of the trust (other than any amount due the Recipients or their estates under the provisions above) to [designated remainderman]
(hereinafter “the Charitable Organization”).If the Charitable Organization is not an organization described in §§ 170(c), 2055(a), and
2522(a) of the Code at the time when any principal or income of the trust is to be distributed to it, then the Trustee shall distribute the
then principal and income to one or more organizations described in §§ 170(c), 2055(a), and 2522(a) of the Code as the Trustee shall
select, and in the proportions as the Trustee shall decide, in the Trustee’s sole discretion.
6.Additional Contributions. No additional contributions shall be made to the trust after the initial contribution.
7.Prohibited Transactions. The Trustee shall not engage in any act of self-dealing within the meaning of § 4941(d) of the Code, as
modified by § 4947(a)(2)(A) of the Code, and shall not make any taxable expenditures within the meaning of § 4945(d) of the Code,
as modified by § 4947(a)(2)(A) of the Code.
8.Taxable Year. The taxable year of the trust shall be the calendar year.
9.Governing Law. The operation of the trust shall be governed by the laws of the State of
.How-
ever, the Trustee is prohibited from exercising any power or discretion granted under said laws that would be inconsistent with the
qualification of the trust as a charitable remainder annuity trust under § 664(d)(1) of the Code and the corresponding regulations.
10.Limited Power of Amendment. This trust is irrevocable. However, the Trustee shall have the power, acting alone, to amend the
trust from time to time in any manner required for the sole purpose of ensuring that the trust qualifies and continues to qualify as a
charitable remainder annuity trust within the meaning of § 664(d)(1) of the Code.
11.Investment of Trust Assets. Nothing in this trust instrument shall be construed to restrict the Trustee from investing the trust
assets in a manner that could result in the annual realization of a reasonable amount of income or gain from the sale or disposition of
trust assets.
SECTION 5. ANNOTATIONS REGARDING SAMPLE INTER VIVOS CHARITABLE REMAINDER
ANNUITY TRUST — TWO LIVES, CONSECUTIVE INTERESTS
.01 Annotations for Introductory Paragraph and Paragraph 1, Funding of Trust, of the Sample Trust.
(1)Factors concerning qualification of trust. A deduction must be allowable under § 170, § 2055, or § 2522 for property
contributed to the trust. Section 1.664–1(a)(1)(iii)(a) of the Income Tax Regulations. The trust must meet the definition
of and function exclusively as a charitable remainder trust from the creation of the trust. Section 1.664–1(a)(4). Solely for
purposes of § 664, a trust is deemed created at the earliest time that neither the grantor nor any other person is treated as
the owner of the entire trust under subpart E, part 1, subchapter J, chapter 1, subtitle A of the Code (subpart E), but in no
event prior to the time property is first transferred to the trust. Neither the donor nor the donor’s spouse shall be treated
as the owner of the trust under subpart E merely because he or she is named as a recipient of the annuity amount. Section
1.664–1(a)(4). In addition, funding the trust with certain types of assets may disqualify it as a charitable remainder trust.
See § 1.664–1(a)(7) and Rev. Rul. 73–610, 1973–2 C.B. 213.
(2)Valuation of unmarketable assets. If the trust is funded with unmarketable assets, the initial net fair market value of the
assets must be determined exclusively by an independent trustee, as defined in § 1.664–1(a)(7)(iii), or must be determined
by a current “qualified appraisal” from a “qualified appraiser,” as defined in § 1.170A–13(c)(3) and (c)(5), respectively.
Section 1.664–1(a)(7).
(3)Income tax deductibility limitations. The amount of the charitable deduction for income tax purposes is affected by a number
of factors, including the type of property contributed to thetrust, the type of charity receiving the property, whether the
remainder interest is paid outright to charity or held in further trust, and the donor’s adjusted gross income (with certain
adjustments). See § 170(b) and (e); § 1.170A–8; Rev. Rul. 80–38, 1980–1 C.B. 56; and Rev. Rul. 79–368, 1979–2 C.B.
109. See section 6.06 of this revenue procedure for an alternate provision that restricts the charitable remainderman to a
public charity (as defined therein).
(4)Trustee provisions. Alternate or successor trustees may be designated in the trust instrument. In addition, the trust instru-
ment may contain other administrative provisions relating to the trustee’s duties and powers, as long as the provisions do
not conflict with the rules governing charitable remainder trusts under § 664 and the regulations thereunder.
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(5)Identity of donor. For purposes of qualification under this revenue procedure, the donor may be an individual or a husband
and wife. Appropriate adjustments should be made to the introductory paragraph if a husband and wife are the donors.
Terms such as “grantor” or “settlor” may be substituted for “donor.”
.02 Annotations for Paragraph 2, Payment of Annuity Amount, of the Sample Trust.
(1)Permissible recipients. For a CRAT with an annuity period based on the lives of two individuals, the annuity amount must
generally be paid to those individuals and both must be living at the time of the creation of the trust. See Rev. Rul. 2002–20,
2002–1 C.B. 794, for situations in which the annuity amount may be paid to a trust for the benefit of an individual who is
financially disabled. An organization described in § 170(c) may receive part, but not all, of the annuity amount. Section
664(d)(1)(A) and § 1.664–2(a)(3)(i). See section 6.02 of this revenue procedure for an alternate provision that provides for
payment of part of the annuity to an organization described in § 170(c).
(2)Percentage requirements. The sum certain annuity amount must be at least 5 percent and not more than 50 percent of the
initial net fair market value of the assets placed in trust. Section 664(d)(1)(A). Even if the sum certain annuity amount is at
least 5 percent and not more than 50 percent of the initial net fair market value of the assets placed in trust, no deduction
will be allowable under § 2055 or § 2522 if the probability that the trust corpus will be exhausted before the death of the
survivor of the recipients exceeds 5 percent. Rev. Rul. 77–374, 1977–2 C.B. 329, and Rev. Rul. 70–452, 1970–2 C.B. 199.
See §§ 1.7520–3(b) and 25.7520–3(b) for special rules that may be applicable in valuing interests transferred to CRATs. In
addition, the value (determined under § 7520) of the charitable remainder interest must be at least 10 percent of the initial
net fair market value of all property placed in the trust. Section 664(d)(1)(D).
(3)Payment of annuity amount in installments. Paragraph 2, Payment of Annuity Amount, of the sample trust specifies that
the annuity amount is to be paid in equal quarterly installments at the end of each quarter. However, the trust instrument
may specify that the annuity amount is to be paid to the recipient annually or in equal or unequal installments throughout
the year. See § 1.664–2(a)(1)(i). The amount of the charitable deduction will be affected by the frequency of payment, by
whether the installments are equal or unequal, and by whether each installment is payable at the beginning or end of the
period. See § 1.664–2(c) and § 20.2031–7(d)(2)(iv).
(4)Payment of annuity amount by close of taxable year. Generally, the annuity amount for any taxable year must be paid before
the close of the taxable year for which it is due. For circumstances under which the annuity amount may be paid within a
reasonable time after the close of the taxable year, see § 1.664–2(a)(1)(i)(a).
(5)Early distributions to charity. The trust instrument may provide that an amount other than the annuity shall be paid (or
may be paid in the discretion of the trustee) to an organization described in § 170(c). If such a distribution is made in kind,
the adjusted basis of the property distributed must be fairly representative of the adjusted basis of the property available for
distribution on the date of distribution. Section 1.664–2(a)(4).
.03 Annotation for Paragraph 3, Payment of Federal Estate Taxes and State Death Taxes, of the Sample
Trust.
(1)Tax payment clause. If it is possible that all or part of the fair market value of the trust assets will be includible for federal
estate tax purposes in the gross estate of the donor, the trustmust contain a tax payment clause. If federal estate taxes and
state death taxes are paid from other sources, the tax payment clause will never become operative. Nevertheless, the tax
payment clause is necessary because it ensures that the trustee will never be required to pay federal estate taxes or state
death taxes from the trust assets. See § 664(d)(1)(B); § 1.664–1(a)(6),Example 3; and Rev. Rul. 82–128, 1982–2 C.B. 71.
.04 Annotations for Paragraph 4, Proration of Annuity Amount, of the Sample Trust.
(1)Prorating annuity amount. To compute the annuity amount in a short taxable year and in the taxable year in which the
annuity period terminates, see § 1.664–2(a)(1)(iv)(a)and(b), respectively.
(2)Determining annuity amount payable in year of a recipient’s death. Paragraph 4, Proration of Annuity Amount, of the
sample trust specifies that the annuity amount shall be prorated on a daily basis. See section 6.05 of this revenue procedure
for alternate provisions that provide for termination of the annuity amount with the last regular payment preceding the death
of each recipient.
.05 Annotations for Paragraph 5, Distribution to Charity, of the Sample Trust.
(1)Minimum value of remainder. As noted in section 5.02(2) of this revenue procedure, the value (determined under § 7520)
of the charitable remainder interest is required to be at least 10 percent of the initial net fair market value of all property
placed in the trust. Section 664(d)(1)(D).
(2)Designated remainderman. Any named charitable remainderman must be an organization described in § 170(c) at the time
of the transfer to the charitable remainder annuity trust. See § 664(d)(1)(C). Any named charitable remainderman also must
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be an organization described in § 2522(a) to qualify for the gift tax charitable deduction and an organization described in
§ 2055(a) to qualify for the estate tax charitable deduction. See Rev. Rul. 77–385, 1977–2 C.B. 331. If it is determined that
a deduction under § 2055(a) will not be necessary in any event, all references to § 2055(a) in the trust instrument may be
deleted. The trust instrument may restrict the charitable remainderman to an organization described in §§ 170(c), 2055(a),
and 2522(a), but grant to a trustee or other person the power to designate the actual charitable remainderman. The gift of
the remainder interest will be incomplete for gift tax purposes if, for example: (i) the donor retains the power to substitute
the charitable remainderman; or (ii) the trust instrument provides the trustee with the power to designate the charitable
remainderman and the donor is not prohibited from serving as trustee. See § 25.2511–2(c). Note, however, that an income
tax charitable deduction is available even if the donor has the authority to substitute the charitable remainderman or the
trustee has the authority to designate the charitable remainderman. Rev. Rul. 68–417, 1968–2 C.B. 103; Rev. Rul. 79–368,
1979–2 C.B. 109. See section 6.07 of this revenue procedure for an alternate provision in which the donor retains the right
to substitute the charitable remainderman. See section 6.08 of this revenue procedure for an alternate provision in which a
recipient is granted a power of appointment to designate the charitable remainderman.
(3)Multiple remaindermen. The remainder interest may pass to more than one charitable organization as long as each organi-
zation is described in §§ 170(c), 2522(a), and, if needed, § 2055(a). Section 1.664–2(a)(6)(i).
(4)Alternative remaindermen. The trust instrument of a CRAT must provide a means for selecting alternative charitable re-
maindermen in the event the designated organization is not qualified at the time any payments are to be made to it from the
trust. Section 1.664–2(a)(6)(iv).
.06 Annotations for Paragraph 7, Prohibited Transactions, of the Sample Trust.
(1)Payment of the annuity amount. Payment of the annuity amount to the recipients is not considered an act of self-dealing
within the meaning of § 4941(d), as modified by § 4947(a)(2)(A), or a taxable expenditure within the meaning of § 4945(d),
as modified by § 4947(a)(2)(A). Section 53.4947–1(c)(2) of the Foundation and Similar Excise Taxes Regulations.
(2)Prohibitions against certain investments and excess business holdings. Prohibitions against investments that jeopardize
the exempt purpose of the trust for purposes of § 4944, as modified by § 4947(a)(2)(A), and against retaining any excess
business holdings for purposes of § 4943, as modified by § 4947(a)(2)(A), are required if the trust provides for payment of
part of an annuity amount to an organization described in § 170(c) and gift and estate tax charitable deductions are sought
for this interest. See § 4947(b)(3). See section 6.02 of this revenue procedure for an alternate provision that provides for
payment of part of the annuity to an organization described in § 170(c).
(3)Trust to continue in existence for benefit of charity. The governing instrument requirements of § 508(e) must be included
in the trust instrument if, after the termination of the annuity period: (i) the trust instrument provides that the trust shall
continue in existence for the benefit of the charitable remainderman and, as a result, the trust will become subject to the pro-
visions of § 4947(a)(1); and (ii) the trust will be treated as a private foundation within the meaning of § 509(a), as modified
by § 4947(a)(1). Except as provided in paragraph 7 of the sample trust, the trust instrument may limit the application of
the provisions of § 508(e) to the period after the termination of the annuity period when the trust continues in existence for
the benefit of the charitable remainderman. Note that when the trust provides for the trust corpus to be retained, in whole
or in part, in trust for the charitable remainderman, the higher deductibility limitations in § 170(b)(1)(A) for the income tax
charitable deduction will not be available (even if the charitable remainderman is restrictedto a public charity) because the
contribution of the trust corpus is made “for the use of” rather than “to” the charitable remainderman. See § 1.170A–8(b).
SECTION 6. ALTERNATE PROVISIONS FOR SAMPLE INTER VIVOS CHARITABLE
REMAINDER ANNUITY TRUST— TWO LIVES, CONSECUTIVE INTERESTS
.01 Annuity Amount Stated as a Specific Dollar Amount.
(1)Explanation. As an alternative to stating the annuity amount as a fraction or percentage of the initial net fair market value
of the assets transferred to the trust, the annuity amount may be stated as a specific dollar amount. Section 1.664–2(a)(1)(ii)
and (iii). In either case, the annuity amount must be not less than 5 percent nor more than 50 percent of the initial net fair
market value of all property placed in trust. Section 664(d)(1)(A).
(2)Instructions for use.
(a)Replace the first sentence of paragraph 2, Payment of Annuity Amount, of the sample trust with the following sentence:
In each taxable year of the trust during the annuity period, the Trustee shall pay to [permissible recipient](here-
inafter “the Initial Recipient”) until the Initial Recipient’s death and thereafter to [permissible recipient](hereinafter
“the Successor Recipient”) (subject to any proration in paragraph 4), an annuity amount equal to [the stated dollar
amount].
(b)Delete the last sentence of paragraph 2, Payment of Annuity Amount, of the sample trust concerning the incorrect valu-
ation of trust assets.
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.02 Payment of Part of the Annuity to an Organization Described in § 170(c).
(1)Explanation. An organization described in § 170(c) may receive part, but not all, of any annuity amount. Section
664(d)(1)(A). If a gift tax charitable deduction, and, if needed, an estate tax charitable deduction are sought for the present
value of the annuity interest passing to a charitable organization, the trust instrument must contain additional provisions.
First, the trust instrument must specify the portion of each annuity payment that is payable to the noncharitable recipient
and to the charitable organization described in §§ 170(c), 2522(a), and, if needed, § 2055(a). Second, the trust instrument
must contain a means for selecting an alternative qualified charitable organization if the designated organization is
not a qualified organization at the time when any annuity amount is to be paid to it. Third, the trust instrument must
contain prohibitions against investments that jeopardize the exempt purpose of the trust for purposes of § 4944, as
modified by § 4947(a)(2)(A), and against retaining any excess business holdings for purposes of § 4943, as modified by
§ 4947(a)(2)(A).
(2)Instructions for use.
(a)Replace paragraph 2, Payment of Annuity Amount, of the sample trust with the following paragraph:
Payment of Annuity Amount. The annuity amount is equal to [a number no less than 5 and no more than 50] percent
of the initial net fair market value of all property transferred to the trust, valued as of the above date (that is, the
date of transfer). In each taxable year of the trust during the annuity period, the Trustee shall pay [the percentage of
the annuity amount payable to the noncharitable recipients] percent of the annuity amount to [permissible recipient]
(hereinafter “the Initial Recipient”) until the Initial Recipient’s death, and thereafter to [permissible recipient](here-
inafter “the Successor Recipient”) (subject to any proration in paragraph 4). In each taxable year of the trust during
the annuity period, the Trustee shall pay [the percentage of the annuity amount payable to the charitable recipient]
percent of the annuity amount to [an organization described in §§ 170(c), 2055(a), and 2522(a) of the Code](here-
inafter “the Charitable Recipient”). The first day of the annuity period shall be the date the property is transferred to
the trust and the last day of the annuity period shall be the date of the death of the survivor of the Initial Recipient
and the Successor Recipient. If the Charitable Recipient is not an organization described in §§ 170(c), 2055(a), and
2522(a) of the Code at the time when any annuity payment is to be distributed to it, then the Trustee shall distribute
that annuity payment to one or more organizations described in §§ 170(c), 2055(a), and 2522(a) of the Code as the
Trustee shall select, and in the proportions as the Trustee shall decide, in the Trustee’s sole discretion. The annuity
amount shall be paid in equal quarterly installmentsat the end of each calendar quarter from income, and to the
extent income is not sufficient, from principal. Any income of the trust for a taxable year in excess of the annuity
amount shall be added to principal. If the initial net fair market value of the trust assets is incorrectly determined,
then within a reasonable period after the value is finally determined for federal tax purposes, the Trustee shall pay to
the Initial Recipient and/or the Successor Recipient and the Charitable Recipient (in the case of an undervaluation)
or receive from the Initial Recipient and/or the Successor Recipient and the Charitable Recipient (in the case of an
overvaluation) an amount equal to the difference between the annuity amount(s) properly payable and the annuity
amount(s) actually paid.
(b)Replace the first parenthetical in paragraph 5, Distribution to Charity, of the sample trust with the following parenthetical:
(other than any amount due the Initial Recipient, the Successor Recipient, or their estates and the Charitable Recipient
under the provisions above).
(c)Add the following sentence after the first and only sentence in paragraph 7, Prohibited Transactions, of the sample trust:
The Trustee shall not make any investments that jeopardize the exempt purpose of the trust for purposes of § 4944 of
the Code, as modified by § 4947(a)(2)(A) of the Code, or retain any excess business holdings for purposes of § 4943
of the Code, as modified by § 4947(a)(2)(A) of the Code.
.03 Qualified Contingency.
(1)Explanation. Under § 664(f), payment of the annuity amount may terminate upon the earlier of the occurrence of a qualified
contingency (as defined in § 664(f)(3)) or the death of the survivor of the initial recipient and the successor recipient. The
amount of the charitable deduction, however, will be determined without regard to a qualified contingency. See § 664(f)(2).
(2)Instruction for use. Replace the second sentence of paragraph 2, Payment of Annuity Amount, of the sample trust with the
following sentence:
The first day of the annuity period shall be the date the property is transferred to the trust and the last day of the annuity
period shall be the date of the death of the survivor of the Initial Recipient and the Successor Recipient or, if earlier, the
date on which occurs the [qualified contingency].
.04 Retaining the Right to Revoke the Interest of the Successor Recipient.
(1)Explanation. The donor may retain the right to revoke or terminate the interest of the successor recipient. This right is
exercisable only by the donor’s last will and testament. Section 1.664–2(a)(4). The retention of this right may have gift and
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estate tax consequences. It will affect the value of the annuity interests transferred. It may also cause a portion of the trust
to be included in the donor’s gross estate for federal estate tax purposes, even if it would otherwise not be includible. The
following alternate provision provides for the donor’s retention of the right to revoke when the donor is also a recipient.
(2)Instructions for use. To retain the right to revoke the successor recipient’s interest by the donor’s last will and testament:
(a)Designate the donor as the initial recipient in paragraph 2, Payment of Annuity Amount, of the sample trust.
(b)Replace the second sentence of paragraph 2, Payment of Annuity Amount, of the sample trust with the following two
sentences:
The Donor hereby expressly reserves the power, exercisable only by the Donor’s last will and testament, to revoke
and terminate the interest of the Successor Recipient under this trust. The first day of the annuity period shall be the
date the property is transferred to the trust and the last day of the annuity period shall be the date of the death of the
survivor of the Initial Recipient and the Successor Recipient or, if the Donor revokes the interest of the Successor
Recipient, the date of the Initial Recipient’s death.
.05 Last Annuity Payments to the Recipients.
(1)Explanation. As an alternative to prorating the annuity amount in the taxable year of the initial recipient’s death, payment
of the initial recipient’s share of the annuity amount may terminate with the last regular payment preceding the initial
recipient’s death. Similarly, as an alternative to prorating the annuity amount in the taxable year of the termination of the
annuity period, payment of the annuity amount may terminate with the last regular payment preceding the termination of
the annuity period. However, the fact that a recipient may not receive the last payment shall not be taken into account for
purposes of determining the present value of the remainder interest. Section 1.664–2(a)(5)(i).
(2)Instructions for use.
(a)To add an alternate provision to terminate the payment of the initial recipient’s share of the annuity amount with the last
regular payment preceding his or her death, replace paragraph 4, Proration of Annuity Amount, of the sample trust with
the following paragraph:
Proration of Annuity Amount. Except as provided below, the Trustee shall prorate the annuity amount on a daily
basis for any short taxable year. The obligation of the Trustee to pay the annuity amount to the Initial Recipient shall
terminate with the regular quarterly installment next preceding the Initial Recipient’s death. In the taxable year of
the trust during which the annuity period ends, the Trustee shall prorate the annuity amount on a daily basis for the
number of days of the annuity period in that taxable year.
(b)To add an alternate provision to terminate the payment of the annuity amount with the last regular payment preceding
the termination of the annuity period, replace paragraph 4, Proration of Annuity Amount, of the sample trust with the
following paragraph:
Proration of Annuity Amount. Except as provided below, the Trustee shall prorate the annuity amount on a daily
basis for any short taxable year. If the Successor Recipient survives the Initial Recipient, the Trustee shall prorate on
a daily basis the next regular annuity payment due after the death of the Initial Recipient between the estate of the
Initial Recipient and the Successor Recipient. In the taxable year of the trust during which the annuity period ends,
the obligation of the Trustee to pay the annuity amount shall terminate with the regular quarterly installment next
preceding the termination of the annuity period.
(c)To add an alternate provision terminating the payment of the initial recipient’s share of the annuity amount with the last
regular payment preceding his or her death, and terminating the payment of the annuity amount with the last regular
payment preceding the termination of the annuity period,replace paragraph 4, Proration of Annuity Amount, of the
sample trust with the following paragraph:
Proration of Annuity Amount. Except as provided below, the Trustee shall prorate the annuity amount on a daily
basis for any short taxable year. The obligation of the Trustee to pay the annuity amount to the Initial Recipient shall
terminate with the regular quarterly installment next preceding the Initial Recipient’s death. In the taxable year of the
trust during which the annuity period ends, the obligation of the Trustee to pay the annuity amount shall terminate
with the regular quarterly installment next preceding the termination of the annuity period.
.06 Restricting the Charitable Remainderman to a Public Charity.
(1)Explanation. The amount of the donor’s income tax charitable deduction is more limited for gifts to certain private foun-
dations than for other charitable organizations. Specifically, charitable organizations described in § 170(c) include private
foundations that are not described in § 170(b)(1)(E). See § 170(b) and Rev. Rul. 79–368, 1979–2 C.B. 109. To avoid
these more restrictive limitations, a donor of an inter vivos CRAT may wish to restrict the charitable remainderman to an
organization that is described in § 170(b)(1)(A) as well as §§ 170(c), 2055(a), and 2522(a) (referred to herein as a “public
charity”).
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(2)Instruction for use. To restrict the charitable remainderman to a public charity, each and every time the phrase “an organi-
zation described in §§ 170(c), 2055(a), and 2522(a) of the Code” appears in the sample trust, replace it with the phrase “an
organization described in §§ 170(b)(1)(A), 170(c), 2055(a), and 2522(a) of the Code.”
.07 Retaining the Right to Substitute the Charitable Remainderman.
(1)Explanation. The donor may retain the right to substitute another charitable remainderman for the charitable remainderman
named in the trust instrument. See Rev. Rul. 76–8, 1976–1 C.B. 179. Note, however, that the retention of this right will
cause the gift of the remainder interest to be incomplete for gift tax purposes. See § 25.2511–2(c) and Rev. Rul. 77–275,
1977–2 C.B. 346.
(2)Instruction for use. Insert the following sentence between the first and last sentences of paragraph 5, Distribution to Charity,
of the sample trust:
The Donor reserves the right to designate, at any time and from time to time, in lieu of the Charitable Organization
identified above, one or more organizations described in §§ 170(c), 2055(a), and 2522(a) of the Code as the charitable
remainderman and shall make any such designation by giving written notice to the Trustee.
.08 Power of Appointment to Designate the Charitable Remainderman.
(1)Explanation. The trust instrument may grant a recipient a power of appointment to designate the charitable remainderman.
See Rev. Rul. 76–7, 1976–1 C.B. 179.
(2)Instruction for use. Replace paragraph 5, Distribution to Charity, of the sample trust with the following paragraph:
Distribution to Charity. At the termination of the annuity period, the Trustee shall distribute all of the then principal
and income of the trust (other than any amount due the Recipients or their estates under the provisions above) to one or
more charitable organizations described in §§ 170(c), 2055(a), and 2522(a) of the Code as [one of the named permissible
recipients] shall appoint and direct by specific reference to this power of appointment by inter vivos or testamentary
instrument. To the extent this power of appointment is not effectively exercised, the principal and income not effectively
appointed shall be distributed to one or more organizations described in §§ 170(c), 2055(a), and 2522(a) of the Code
as the Trustee shall select, and in the proportions as the Trustee shall decide, in the Trustee’s sole discretion. If an
organization fails to qualify as an organization described in §§ 170(c), 2055(a), and 2522(a) of the Code at the time
when any principal or income of the trust is to be distributed to it, then the Trustee shall distribute the then principal
and income to one or more organizations described in §§ 170(c), 2055(a), and 2522(a) of the Code as the Trustee shall
select, and in the proportions as the Trustee shall decide, in the Trustee’s sole discretion.
SECTION 7. EFFECT ON OTHER REVENUE PROCEDURES
Section 4 of Rev. Proc. 90–32 is superseded.
DRAFTING INFORMATION
The principal authors of this revenue procedure are Karlene M. Lesho and Stephanie N. Bland of the Office of Associate Chief
Counsel (Passthroughs and Special Industries). For further information regarding this revenue procedure, contact Karlene M. Lesho
or Stephanie N. Bland at (202) 622–7830 (not a toll-free call).
26 CFR 601.201: Rulings and determination letters.
(Also Part I, §§ 170, 664, 2055, 2522; 1.170A–6, 1.664–2, 20.2055–2, 25.2522(c)–3.)
Rev. Proc. 2003–56
SECTION 1. PURPOSE
This revenue procedure contains an annotated sample declaration of trust and alternate provisions that meet the requirements of
§ 664(d)(1) of the Internal Revenue Code for an inter vivos charitable remainder annuity trust (CRAT) providing for annuity payments
payable concurrently and consecutively for two measuring lives followed by the distribution of trust assets to a charitable remainder-
man.
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SECTION 2. BACKGROUND
Previously, the Internal Revenue Service issued sample trust instruments for certain types of CRATs. The Service is updating the
previously issued samples and issuing new samples for additional types of CRATs; annotations and alternate sample provisions are
included as further guidance. In addition to the sample trust instrument included in this revenue procedure for an inter vivos CRAT
providing for annuity payments payable concurrently and consecutively for two measuring lives, samples are provided in separate
revenue procedures for:
(a)an inter vivos CRAT providing for annuity payments for one measuring life (see Rev. Proc. 2003–53, superceding Rev.
Proc. 89–21, 1989–1 C.B. 842);
(b)an inter vivos CRAT providing for annuity payments for a term of years (see Rev. Proc. 2003–54);
(c)an inter vivos CRAT providing for annuity payments payable consecutively for two measuring lives (see Rev. Proc.
2003–55, superceding section 4 of Rev. Proc. 90–32, 1990–1 C.B. 546);
(d)a testamentary CRAT providing for annuity payments for one measuring life (see Rev. Proc. 2003–57, superceding section
6 of Rev. Proc. 90–32);
(e)a testamentary CRAT providing for annuity payments for a term of years (see Rev. Proc. 2003–58);
(f)a testamentary CRAT providing for annuity payments payable consecutively for two measuring lives (see Rev. Proc.
2003–59, superceding section 7 of Rev. Proc. 90–32); and
(g)a testamentary CRAT providing for annuity payments payable concurrently and consecutively for two measuring lives (see
Rev. Proc. 2003–60, superceding section 8 of Rev. Proc. 90–32).
SECTION 3. SCOPE AND OBJECTIVE
Section 4 of this revenue procedure provides a sample declaration of trust for an inter vivos CRAT with concurrent and consecutive
interests for two measuring lives that is created by an individual who is a citizen or resident of the United States. Section 5 of this
revenue procedure provides annotations to the provisions of the sample trust. Section 6 of this revenue procedure provides samples
of alternate provisions concerning: (.01) the statement of the annuity amount as a specific dollar amount; (.02) the payment of part
of the annuity to an organization described in § 170(c); (.03) a qualified contingency; (.04) the retained right to revoke the interest of
the survivor recipient; (.05) the last annuity payments to the recipients; (.06) the restriction of the charitable remainderman to a public
charity; (.07) the retained right to substitute the charitable remainderman; and (.08) a power of appointment to designate the charitable
remainderman.
For transfers to a qualifying CRAT, as defined in § 664(d)(1), the remainder interest will be deductible by a citizen or resident of
the United States under §§ 170(f)(2)(A), 2055(e)(2)(A), and 2522(c)(2)(A) for income, estate, and gift tax purposes, respectively, if
the other requirements of §§ 170(f)(2)(A), 2055(e)(2)(A), and 2522(c)(2)(A) (that is, the requirements not relating to the provisions
of the governing instrument) are also met. The Service will recognize a trust as a qualified CRAT meeting all of the requirements of
§ 664(d)(1) if the trust operates in a manner consistent with the terms of the trust instrument, if the trust is a valid trust under applicable
local law, and if the trust instrument: (i) is substantially similar to the sample in section 4 of this revenue procedure; or (ii) properly
integrates one or more alternate provisions from section 6 of this revenue procedure into a document substantially similar to the sample
in section 4 of this revenue procedure. A trust instrument that contains substantive provisions in addition to those provided in section
4 of this revenue procedure (other than properly integrated alternate provisions from section 6 of this revenue procedure, or provisions
necessary to establish a valid trust under applicable local law that arenot inconsistent with the applicable federal tax requirements),
or that omits any of the provisions of section 4 of this revenue procedure (unless an alternate provision from section 6 of this revenue
procedure is properly integrated), will not necessarily be disqualified, but neither will that trust be assured of qualification under the
provisions of this revenue procedure. The Service generally will not issue a letter ruling on whether an inter vivos trust created by an
individual and with concurrent and consecutive interests for two measuring lives qualifies as a CRAT. The Service, however, generally
will issue letter rulings on the effect of substantive trust provisions, other than those contained in sections 4 and 6 of this revenue
procedure, on the qualification of a trust as a CRAT.
SECTION 4. SAMPLE INTER VIVOS CHARITABLE REMAINDER ANNUITY TRUST — TWO
LIVES, CONCURRENT AND CONSECUTIVE INTERESTS
On thisday of,20,I,(hereinafter “the Donor”), desiring to establish a char-
itable remainder annuity trust, within the meaning of Rev. Proc. 2003–56 and § 664(d)(1) of the Internal Revenue Code (hereinafter
“the Code”), hereby enter into this trust agreement with
as the initial trustee (hereinafter “the Trustee”). This trust
shall be known as the
Charitable Remainder Annuity Trust.
1.Funding of Trust. The Donor hereby transfers and irrevocably assigns, on the above date, to the Trustee the property described
in Schedule A, and the Trustee accepts the property and agrees to hold, manage, and distribute the property under the terms set forth
in this trust instrument.
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2.Payment of Annuity Amount. In each taxable year of the trust during the annuity period, the Trustee shall pay to [permissible
recipient]andto[permissible recipient] (hereinafter “the Recipients”) in equal shares during their lifetimes, an annuity amount equal
to [a number no less than 5 and no more than 50] percent of the initial net fair market value of all property transferred to the trust,
valued as of the above date (that is, the date of the transfer), andupon the death of one (hereinafter “the Predeceasing Recipient”),
the Trustee shall pay the entire annuity amount (subject to any proration in paragraph 4) to the survivor (hereinafter “the Survivor
Recipient”). The first day of the annuity period shall be the date the property is transferred to the trust and the last day of the annuity
period shall be the date of the Survivor Recipient’s death. The annuity amount shall be paid in equal quarterly installments at the end
of each calendar quarter from income, and to the extent income is notsufficient, from principal. Any income of the trust for a taxable
year in excess of the annuity amount shall be added to principal. If the initial net fair market value of the trust assets is incorrectly
determined, then within a reasonable period after the value is finally determined for federal tax purposes, the Trustee shall pay to the
Recipients (in the case of an undervaluation) or receive from the Recipients (in the case of an overvaluation) an amount equal to the
difference between the annuity amount(s) properly payable and the annuity amount(s) actually paid.
3.Payment of Federal Estate Taxes and State Death Taxes. The lifetime annuity interest of the Survivor Recipient will continue
in effect upon the death of the Predeceasing Recipient only if the Survivor Recipient furnishes the funds for payment of any federal
estate taxes and state death taxes for which the Trustee may be liable upon the death of the Predeceasing Recipient. If the funds are not
furnished by the Survivor Recipient, the annuity period shall terminate on the death of the Predeceasing Recipient, notwithstanding
any other provision in this instrument to the contrary.
4.Proration of Annuity Amount. The Trustee shall prorate the annuity amount on a daily basis for any short taxable year. Upon the
death of the Predeceasing Recipient, the Trustee shall prorate on a daily basis the Predeceasing Recipient’s share of the next regular
annuity payment between the estate of the Predeceasing Recipient andthe Survivor Recipient. In the taxable year of the trust during
which the annuity period ends, the Trustee shall prorate the annuity amount on a daily basis for the number of days of the annuity
period in that taxable year.
5.Distribution to Charity. At the termination of the annuity period, the Trustee shall distribute all of the then principal and income
of the trust (other than any amount due the Recipients or their estates under the provisions above) to [designated remainderman]
(hereinafter “the Charitable Organization”).If the Charitable Organization is not an organization described in §§ 170(c), 2055(a), and
2522(a) of the Code at the time when any principal or income of the trust is to be distributed to it, then the Trustee shall distribute the
then principal and income to one or more organizations described in §§ 170(c), 2055(a), and 2522(a) of the Code as the Trustee shall
select, and in the proportions as the Trustee shall decide, in the Trustee’s sole discretion.
6.Additional Contributions. No additional contributions shall be made to the trust after the initial contribution.
7.Prohibited Transactions. The Trustee shall not engage in any act of self-dealing within the meaning of § 4941(d) of the Code, as
modified by § 4947(a)(2)(A) of the Code, and shall not make any taxable expenditures within the meaning of § 4945(d) of the Code,
as modified by § 4947(a)(2)(A) of the Code.
8.Taxable Year. The taxable year of the trust shall be the calendar year.
9.Governing Law. The operation of the trust shall be governed by the laws of the State of
.How-
ever, the Trustee is prohibited from exercising any power or discretion granted under said laws that would be inconsistent with the
qualification of the trust as a charitable remainder annuity trust under § 664(d)(1) of the Code and the corresponding regulations.
10.Limited Power of Amendment. This trust is irrevocable. However, the Trustee shall have the power, acting alone, to amend the
trust from time to time in any manner required for the sole purpose of ensuring that the trust qualifies and continues to qualify as a
charitable remainder annuity trust within the meaning of § 664(d)(1) of the Code.
11.Investment of Trust Assets. Nothing in this trust instrument shall be construed to restrict the Trustee from investing the trust
assets in a manner that could result in the annual realization of a reasonable amount of income or gain from the sale or disposition of
trust assets.
SECTION 5. ANNOTATIONS REGARDING SAMPLE INTER VIVOS CHARITABLE REMAINDER
ANNUITY TRUST — TWO LIVES, CONCURRENT AND CONSECUTIVE INTERESTS
.01 Annotations for Introductory Paragraph and Paragraph 1, Funding of Trust, of the Sample Trust.
(1)Factors concerning qualification of trust. A deduction must be allowable under § 170, § 2055, or § 2522 for property
contributed to the trust. Section 1.664–1(a)(1)(iii)(a) of the Income Tax Regulations. The trust must meet the definition
of and function exclusively as a charitable remainder trust from the creation of the trust. Section 1.664–1(a)(4). Solely for
purposes of § 664, a trust is deemed created at the earliest time that neither the grantor nor any other person is treated as
the owner of the entire trust under subpart E, part 1, subchapter J, chapter 1, subtitle A of the Code (subpart E), but in no
event prior to the time property is first transferred to the trust. Neither the donor nor the donor’s spouse shall be treated
as the owner of the trust under subpart E merely because he or she is named as a recipient of the annuity amount. Section
1.664–1(a)(4). In addition, funding the trust with certain types of assets may disqualify it as a charitable remainder trust.
See § 1.664–1(a)(7) and Rev. Rul. 73–610, 1973–2 C.B. 213.
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(2)Valuation of unmarketable assets. If the trust is funded with unmarketable assets, the initial net fair market value of the
assets must be determined exclusively by an independent trustee, as defined in § 1.664–1(a)(7)(iii), or must be determined
by a current “qualified appraisal” from a “qualified appraiser,” as defined in § 1.170A–13(c)(3) and (c)(5), respectively.
Section 1.664–1(a)(7).
(3)Income tax deductibility limitations. The amount of the charitable deduction for income tax purposes is affected by a number
of factors, including the type of property contributed to thetrust, the type of charity receiving the property, whether the
remainder interest is paid outright to charity or held in further trust, and the donor’s adjusted gross income (with certain
adjustments). See § 170(b) and (e); § 1.170A–8; Rev. Rul. 80–38, 1980–1 C.B. 56; and Rev. Rul. 79–368, 1979–2 C.B.
109. See section 6.06 of this revenue procedure for an alternate provision that restricts the charitable remainderman to a
public charity (as defined therein).
(4)Trustee provisions. Alternate or successor trustees may be designated in the trust instrument. In addition, the trust instru-
ment may contain other administrative provisions relating to the trustee’s duties and powers, as long as the provisions do
not conflict with the rules governing charitable remainder trusts under § 664 and the regulations thereunder.
(5)Identity of donor. For purposes of qualification under this revenue procedure, the donor may be an individual or a husband
and wife. Appropriate adjustments should be made to the introductory paragraph if a husband and wife are the donors.
Terms such as “grantor” or “settlor” may be substituted for “donor.”
.02 Annotations for Paragraph 2, Payment of Annuity Amount, of the Sample Trust.
(1)Permissible recipients. For a CRAT having an annuity period based on the lives of two individuals, the annuity amount must
generally be paid to those individuals, and both must be living at the time of the creation of the trust. See Rev. Rul. 2002–20,
2002–1 C.B. 794, for situations in which the annuity amount may be paid to a trust for the benefit of an individual who is
financially disabled. An organization described in § 170(c) may receive part, but not all, of the annuity amount. Section
664(d)(1)(A) and § 1.664–2(a)(3)(i). See section 6.02 of this revenue procedure for an alternate provision that provides for
payment of part of the annuity to an organization described in § 170(c).
(2)Division of annuity amount between recipients. The sample trust provides that while both recipients are alive they will share
the annuity amount equally and upon the death of the predeceasing recipient the survivor recipient will receive all of the
annuity amount, subject to any proration in paragraph 4. The annuity amount may be divided other than equally during the
joint lives of the recipients. In addition, the share of the predeceasing recipient may be made payable to an organization
described in § 170(c) for the rest of the survivor recipient’s life.
(3)Percentage requirements. The sum certain annuity amount must be at least 5 percent and not more than 50 percent of the
initial net fair market value of the assets placed in trust. Section 664(d)(1)(A). Even if the sum certain annuity amount is at
least 5 percent and not more than 50 percent of the initial net fair market value of the assets placed in trust, no deduction
will be allowable under § 2055 or § 2522 if the probability that the trust corpus will be exhausted before the death of the
survivor of the recipients exceeds 5 percent. Rev. Rul. 77–374, 1977–2 C.B. 329 and Rev. Rul. 70–452, 1970–2 C.B. 199.
See §§ 1.7520–3(b) and 25.7520–3(b) for special rules that may be applicable in valuing interests transferred to CRATs. In
addition, the value (determined under § 7520) of the charitable remainder interest must be at least 10 percent of the initial
net fair market value of all property placed in the trust. Section 664(d)(1)(D).
(4)Payment of annuity amount in installments. Paragraph 2, Payment of Annuity Amount, of the sample trust specifies that
the annuity amount is to be paid in equal quarterly installments at the end of each quarter. However, the trust instrument
may specify that the annuity amount is to be paid to the recipients annually or in equal or unequal installments throughout
the year. See § 1.664–2(a)(1)(i). The amount of the charitable deduction will be affected by the frequency of payment, by
whether the installments are equal or unequal, and by whether each installment is payable at the beginning or end of the
period. See § 1.664–2(c) and § 20.2031–7(d)(2)(iv).
(5)Payment of annuity amount by close of taxable year. Generally, the annuity amount for any taxable year must be paid before
the close of the taxable year for which it is due. For circumstances under which the annuity amount may be paid within a
reasonable time after the close of the taxable year, see § 1.664–2(a)(1)(i)(a).
(6)Early distributions to charity. The trust instrument may provide that an amount other than the annuity shall be paid (or
may be paid in the discretion of the trustee) to an organization described in § 170(c). If such a distribution is made in kind,
the adjusted basis of the property distributed must be fairly representative of the adjusted basis of the property available for
distribution on the date of distribution. Section 1.664–2(a)(4).
.03 Annotation for Paragraph 3, Payment of Federal Estate Taxes and State Death Taxes, of the Sample
Trust.
(1)Tax payment clause. If it is possible that all or part of the fair market value of the trust assets will be includible for federal
estate tax purposes in the gross estate of the donor, the trustmust contain a tax payment clause. If federal estate taxes and
state death taxes are paid from other sources, the tax payment clause will never become operative. Nevertheless, the tax
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payment clause is necessary because it ensures that the trustee will never be required to pay federal estate taxes or state
death taxes from the trust assets. See § 664(d)(1)(B); § 1.664–1(a)(6),Example 3; and Rev. Rul. 82–128, 1982–2 C.B. 71.
.04 Annotations for Paragraph 4, Proration of Annuity Amount, of the Sample Trust.
(1)Prorating annuity amount. To compute the annuity amount in a short taxable year and in the taxable year in which the
annuity period terminates, see § 1.664–2(a)(1)(iv)(a)and(b), respectively.
(2)Determining annuity amount payable in year of a recipient’s death. Paragraph 4, Proration of Annuity Amount, of the
sample trust specifies that the annuity amount shall be prorated on a daily basis. See section 6.05 of this revenue procedure
for alternate provisions that provide for termination of the annuity amount with the last regular payment preceding the death
of each recipient.
.05 Annotations for Paragraph 5, Distribution to Charity, of the Sample Trust.
(1)Minimum value of remainder. As noted in section 5.02(3) of this revenue procedure, the value (determined under § 7520)
of the charitable remainder interest is required to be at least 10 percent of the initial net fair market value of all property
placed in the trust. Section 664(d)(1)(D).
(2)Designated remainderman. Any named charitable remainderman must be an organization described in § 170(c) at the time
of the transfer to the charitable remainder annuity trust. See § 664(d)(1)(C). Any named charitable remainderman also must
be an organization described in § 2522(a) to qualify for the gift tax charitable deduction and an organization described in
§ 2055(a) to qualify for the estate tax charitable deduction. See Rev. Rul. 77–385, 1977–2 C.B. 331. If it is determined that
a deduction under § 2055(a) will not be necessary in any event, all references to § 2055(a) in the trust instrument may be
deleted. The trust instrument may restrict the charitable remainderman to an organization described in §§ 170(c), 2055(a),
and 2522(a), but grant to a trustee or other person the power to designate the actual charitable remainderman. The gift of
the remainder interest will be incomplete for gift tax purposes if, for example: (i) the donor retains the power to substitute
the charitable remainderman; or (ii) the trust instrument provides the trustee with the power to designate the charitable
remainderman and the donor is not prohibited from serving as trustee. See § 25.2511–2(c). Note, however, that an income
tax charitable deduction is available even if the donor has the authority to substitute the charitable remainderman or the
trustee has the authority to designate the charitable remainderman. Rev. Rul. 68–417, 1968–2 C.B. 103; Rev. Rul. 79–368,
1979–2 C.B. 109. See section 6.07 of this revenue procedure for an alternate provision in which the donor retains the right
to substitute the charitable remainderman. See section 6.08 of this revenue procedure for an alternate provision in which a
recipient is granted a power of appointment to designate the charitable remainderman.
(3)Multiple remaindermen. The remainder interest may pass to more than one charitable organization as long as each organi-
zation is described in §§ 170(c), 2522(a), and, if needed, § 2055(a). Section 1.664–2(a)(6)(i).
(4)Alternative remaindermen. The trust instrument of a CRAT must provide a means for selecting alternative charitable re-
maindermen in the event the designated organization is not qualified at the time any payments are to be made to it from the
trust. Section 1.664–2(a)(6)(iv).
.06 Annotations for Paragraph 7, Prohibited Transactions, of the Sample Trust.
(1)Payment of the annuity amount. Payment of the annuity amount to the recipients is not considered an act of self-dealing
within the meaning of § 4941(d), as modified by § 4947(a)(2)(A), or a taxable expenditure within the meaning of § 4945(d),
as modified by § 4947(a)(2)(A). Section 53.4947–1(c)(2) of the Foundation and Similar Excise Taxes Regulations.
(2)Prohibitions against certain investments and excess business holdings. Prohibitions against investments that jeopardize
the exempt purpose of the trust for purposes of § 4944, as modified by § 4947(a)(2)(A), and against retaining any excess
business holdings for purposes of § 4943, as modified by § 4947(a)(2)(A), are required if the trust provides for payment of
part of an annuity amount to an organization described in § 170(c) and gift and estate tax charitable deductions are sought
for this interest. See § 4947(b)(3). See section 6.02 of this revenue procedure for an alternate provision that provides for
payment of part of the annuity to an organization described in § 170(c).
(3)Trust to continue in existence for benefit of charity. The governing instrument requirements of § 508(e) must be included
in the trust instrument if, after the termination of the annuity period: (i) the trust instrument provides that the trust shall
continue in existence for the benefit of the charitable remainderman and, as a result, the trust will become subject to the pro-
visions of § 4947(a)(1); and (ii) the trust will be treated as a private foundation within the meaning of § 509(a), as modified
by § 4947(a)(1). Except as provided in paragraph 7 of the sample trust, the trust instrument may limit the application of
the provisions of § 508(e) to the period after the termination of the annuity period when the trust continues in existence for
the benefit of the charitable remainderman. Note that when the trust provides for the trust corpus to be retained, in whole
or in part, in trust for the charitable remainderman, the higher deductibility limitations in § 170(b)(1)(A) for the income tax
charitable deduction will not be available (even if the charitable remainderman is restrictedto a public charity) because the
contribution of the trust corpus is made “for the use of” rather than “to” the charitable remainderman. See § 1.170A–8(b).
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SECTION 6. ALTERNATE PROVISIONS FOR SAMPLE INTER VIVOS CHARITABLE REMAINDER
ANNUITY TRUST — TWO LIVES, CONCURRENT AND CONSECUTIVE INTERESTS
.01 Annuity Amount Stated as a Specific Dollar Amount.
(1)Explanation. As an alternative to stating the annuity amount as a fraction or percentage of the initial net fair market value
of the assets transferred to the trust, the annuity amount may be stated as a specific dollar amount. Section 1.664–2(a)(1)(ii)
and (iii). In either case, the annuity amount must be not less than 5 percent nor more than 50 percent of the initial net fair
market value of all property placed in trust. Section 664(d)(1)(A).
(2)Instructions for use.
(a)Replace the first sentence of paragraph 2, Payment of Annuity Amount, of the sample trust with the following sentence:
In each taxable year of the trust during the annuity period, the Trustee shall pay to [permissible recipient]andto
[permissible recipient] (hereinafter “the Recipients”) in equal shares during their lifetimes an annuity amount equal
to [the stated dollar amount], and upon the death of one (hereinafter “thePredeceasing Recipient”), the Trustee shall
pay the entire annuity amount (subject to any proration in paragraph 4) to the survivor (hereinafter “the Survivor
Recipient”).
(b)Delete the last sentence of paragraph 2, Payment of Annuity Amount, of the sample trust concerning the incorrect valu-
ation of trust assets.
.02 Payment of Part of the Annuity to an Organization Described in § 170(c).
(1)Explanation. An organization described in § 170(c) may receive part, but not all, of any annuity amount. Section
664(d)(1)(A). If a gift tax charitable deduction and, if needed, an estate tax charitable deduction are sought for the present
value of the annuity interest passing to a charitable organization, the trust instrument must contain additional provisions.
First, the trust instrument must specify the portion of each annuity payment that is payable tothe noncharitable recipients
and to the charitable organization described in §§ 170(c), 2522(a), and, if needed, § 2055(a). Second, the trust instrument
must contain a means for selecting an alternative qualified charitable organization if the designated organization is
not a qualified organization at the time when any annuity amount is to be paid to it. Third, the trust instrument must
contain prohibitions against investments that jeopardize the exempt purpose of the trust for purposes of § 4944, as
modified by § 4947(a)(2)(A), and against retaining any excess business holdings for purposes of § 4943, as modified by
§ 4947(a)(2)(A).
(2)Instructions for use.
(a)Replace paragraph 2, Payment of Annuity Amount, of the sample trust with the following paragraph:
Payment of Annuity Amount. The annuity amount is equal to [a number no less than 5 and no more than 50] percent
of the initial net fair market value of all property transferred to the trust, valued as of the above date (that is, the date
of the transfer). In each taxable year of the trust during the annuity period, the Trustee shall pay [the percentage of
the annuity amount payable to the noncharitable recipients] percent of the annuity amount to [permissible recipient]
and [permissible recipient] (hereinafter “the Recipients”) in equal shares during their joint lives, and upon the death
of one (hereinafter “the Predeceasing Recipient”), the Trustee shall pay that entire percentage of the annuity amount
(subject to any proration in paragraph 4) to the survivor (hereinafter “the Survivor Recipient”). In each taxable year
of the trust during the annuity period, the Trustee shall pay [the percentage of the annuity amount payable to the
charitable recipient] percent of the annuity amount to [an organization described in §§ 170(c), 2055(a), and 2522(a)
of the Code] (hereinafter “the Charitable Recipient”). The first day of the annuity period shall be the date the property
is transferred to the trust and the last day of the annuity period shall be the date of the Survivor Recipient’s death. If
the Charitable Recipient is not an organization described in §§ 170(c), 2055(a), and 2522(a) of the Code at the time
when any annuity payment is to be distributed to it, then the Trustee shall distribute that annuity payment to one or
more organizations described in §§ 170(c), 2055(a), and 2522(a) of the Code as the Trustee shall select, and in the
proportions as the Trustee shall decide, in the Trustee’s sole discretion. The annuity amount shall be paid in equal
quarterly installments at the end of each calendar quarterfrom income, and to the extent income is not sufficient,
from principal. Any income of the trust for a taxable year in excess of the annuity amount shall be added to principal.
If the initial net fair market value of the trust assets is incorrectly determined, then within a reasonable period after
the value is finally determined for federal tax purposes, the Trustee shall pay to the Recipients and the Charitable
Recipient (in the case of an undervaluation) or receive fromthe Recipients and the Charitable Recipient (in the case of
an overvaluation) an amount equal to the difference betweenthe annuity amount(s) properly payable and the annuity
amount(s) actually paid.
(b)Replace the first parenthetical in paragraph 5, Distribution to Charity, of the sample trust with the following parenthetical:
(other than any amount due the Recipients or their estatesand the Charitable Recipient under the provisions above).
(c)Add the following sentence after the first and only sentence in paragraph 7, Prohibited Transactions, of the sample trust:
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The Trustee shall not make any investments that jeopardize the exempt purpose of the trust for purposes of § 4944 of
the Code, as modified by § 4947(a)(2)(A) of the Code, or retain any excess business holdings for purposes of § 4943
of the Code, as modified by § 4947(a)(2)(A) of the Code.
.03 Qualified Contingency.
(1)Explanation. Under § 664(f), payment of the annuity amount may terminate upon the earlier of the occurrence of a qualified
contingency (as defined in § 664(f)(3)) or the death of the survivor recipient. The amount of the charitable deduction,
however, will be determined without regard to a qualified contingency. See § 664(f)(2).
(2)Instruction for use. Replace the second sentence of paragraph 2, Payment of Annuity Amount, of the sample trust with the
following sentence:
The first day of the annuity period shall be the date the property is transferred to the trust and the last day of the annuity
period shall be the date of the Survivor Recipient’s death or, if earlier, the date on which occurs the [qualified contin-
gency].
.04 Retaining the Right to Revoke the Interest of the Survivor Recipient.
(1)Explanation. The donor may retain the right to revoke or terminate the interest of the other noncharitable recipient. This
right is exercisable only by the donor’s last will and testament. Section 1.664–2(a)(4). The retention of this right may have
gift and estate tax consequences. It will affect the value of the annuity interests transferred. It may also cause a portion of the
trust to be included in the donor’s gross estate for federal estate tax purposes, even if it would otherwise not be includible.
The following alternate provision provides for the donor’s retention of the right to revoke when the donor is also a recipient.
(2)Instructions for use. To retain the right to revoke the other noncharitable recipient’s interest by the donor’s last will and
testament:
(a)Designate the donor as a recipient in paragraph 2, Payment of Annuity Amount, of the sample trust.
(b)Replace the second sentence of paragraph 2, Payment of Annuity Amount, of the sample trust with the following two
sentences:
The Donor hereby expressly reserves the power, exercisable only by the Donor’s last will and testament, to revoke
and terminate the interest of [the name of permissible recipient who is not the Donor] under this trust. The first day
of the annuity period shall be the date the property is transferred to the trust and the last day of the annuity period
shall be the date of death of the Survivor Recipient, or on the earlier death of the Donor if the power to revoke [the
name of permissible recipient who is not the Donor]’s interest is exercised.
.05 Last Annuity Payments to the Recipients.
(1)Explanation. As an alternative to prorating the annuity amount in the taxable year of the predeceasing recipient’s death,
payment of the predeceasing recipient’s share of the annuity amount may terminate with the last regular payment preceding
the predeceasing recipient’s death. Similarly, as an alternative to prorating the annuity amount in the taxable year of the
termination of the annuity period, payment of the annuity amount may terminate with the last regular payment preceding
the termination of the annuity period. However, the fact that a recipient may not receive the last payment shall not be taken
into account for purposes of determining the present value of the remainder interest. Section 1.664–2(a)(5)(i).
(2)Instructions for use.
(a)To add an alternate provision to terminate the payment of the predeceasing recipient’s share of the annuity amount with
the last regular payment preceding his or her death, replace paragraph 4, Proration of Annuity Amount, of the sample
trust with the following paragraph:
Proration of Annuity Amount. Except as provided below, the Trustee shall prorate the annuity amount on a daily basis
for any short taxable year. The obligation of the Trustee to pay a share of the annuity amount to the Predeceasing
Recipient shall terminate with the regular quarterly installment next preceding the Predeceasing Recipient’s death.
In the taxable year of the trust during which the annuity period ends, the Trustee shall prorate the annuity amount on
a daily basis for the number of days of the annuity period in that taxable year.
(b)To add an alternate provision to terminate the payment of the annuity amount with the last regular payment preceding
the termination of the annuity period, replace paragraph 4, Proration of Annuity Amount, of the sample trust with the
following paragraph:
Proration of Annuity Amount. Except as provided below, the Trustee shall prorate the annuity amount on a daily basis
for any short taxable year. Upon the death of the Predeceasing Recipient, the Trustee shall prorate on a daily basis the
Predeceasing Recipient’s share of the next regular annuity payment between the estate of the Predeceasing Recipient
and the Survivor Recipient. In the taxable year of the trust during which the annuity period ends, the obligation
of the Trustee to pay the annuity amount shall terminate with the regular quarterly installment next preceding the
termination of the annuity period.
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(c)To add an alternate provision terminating the payment of the predeceasing recipient’s share of the annuity amount with
the last regular payment preceding his or her death, and terminating the payment of the annuity amount with the last
regular payment preceding the termination of the annuity period, replace paragraph 4, Proration of Annuity Amount, of
the sample trust with the following paragraph:
Proration of Annuity Amount. Except as provided below, the Trustee shall prorate the annuity amount on a daily basis
for any short taxable year. The obligation of the Trustee to pay a share of the annuity amount to the Predeceasing
Recipient shall terminate with the regular quarterly installment next preceding the Predeceasing Recipient’s death.
In the taxable year of the trust during which the annuity period ends, the obligation of the Trustee to pay the annuity
amount shall terminate with the regular quarterly installment next preceding the termination of the annuity period.
.06 Restricting the Charitable Remainderman to a Public Charity.
(1)Explanation. The amount of the donor’s income tax charitable deduction is more limited for gifts to certain private foun-
dations than for other charitable organizations. Specifically, charitable organizations described in § 170(c) include private
foundations that are not described in § 170(b)(1)(E). See § 170(b) and Rev. Rul. 79–368, 1979–2 C.B. 109. To avoid
these more restrictive limitations, a donor of an inter vivos CRAT may wish to restrict the charitable remainderman to an
organization that is described in § 170(b)(1)(A) as well as §§ 170(c), 2055(a), and 2522(a) (referred to herein as a “public
charity”).
(2)Instructions for use. To restrict the charitable remainderman to a public charity, each and every time the phrase “an organi-
zation described in §§ 170(c), 2055(a), and 2522(a) of the Code” appears in the sample trust, replace it with the phrase “an
organization described in §§ 170(b)(1)(A), 170(c), 2055(a), and 2522(a) of the Code.”
.07 Retaining the Right to Substitute the Charitable Remainderman.
(1)Explanation. The donor may retain the right to substitute another charitable remainderman for the charitable remainderman
named in the trust instrument. See Rev. Rul. 76–8, 1976–1 C.B. 179. Note, however, that the retention of this right will
cause the gift of the remainder interest to be incomplete for gift tax purposes. See § 25.2511–2(c) and Rev. Rul. 77–275,
1977–2 C.B. 346.
(2)Instruction for use. Insert the following sentence between the first and last sentences of paragraph 5, Distribution to Charity,
of the sample trust:
The Donor reserves the right to designate, at any time and from time to time, in lieu of the Charitable Organization
identified above, one or more organizations described in §§ 170(c), 2055(a), and 2522(a) of the Code as the charitable
remainderman and shall make any such designation by giving written notice to the Trustee.
.08 Power of Appointment to Designate the Charitable Remainderman.
(1)Explanation. The trust instrument may grant a recipient a power of appointment to designate the charitable remainderman.
See Rev. Rul. 76–7, 1976–1 C.B. 179.
(2)Instruction for use. Replace paragraph 5, Distribution to Charity, of the sample trust with the following paragraph:
Distribution to Charity. At the termination of the annuity period, the Trustee shall distribute all of the then principal
and income of the trust (other than any amount due the Recipients or their estates under the provisions above) to one or
more charitable organizations described in §§ 170(c), 2055(a), and 2522(a) of the Code as [one of the named permissible
recipients] shall appoint and direct by specific reference to this power of appointment by inter vivos or testamentary
instrument. To the extent this power of appointment is not effectively exercised, the principal and income not effectively
appointed shall be distributed to one or more organizations described in §§ 170(c), 2055(a), and 2522(a) of the Code
as the Trustee shall select, and in the proportions as the Trustee shall decide, in the Trustee’s sole discretion. If an
organization fails to qualify as an organization described in §§ 170(c), 2055(a), and 2522(a) of the Code at the time
when any principal or income of the trust is to be distributed to it, then the Trustee shall distribute the then principal
and income to one or more organizations described in §§ 170(c), 2055(a), and 2522(a) of the Code as the Trustee shall
select, and in the proportions as the Trustee shall decide, in the Trustee’s sole discretion.
SECTION 7. EFFECT ON OTHER REVENUE PROCEDURES
Section 5 of Rev. Proc. 90–32 is superseded.
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DRAFTING INFORMATION
The principal authors of this revenue procedure are Karlene M. Lesho and Stephanie N. Bland of the Office of Associate Chief
Counsel (Passthroughs and Special Industries). For further information regarding this revenue procedure, contact Karlene M. Lesho
or Stephanie N. Bland at (202) 622–7830 (not a toll-free call).
26 CFR 601.201: Rulings and determination letters.
(Also Part I, §§ 170, 664, 2055, 1.664–2, 20.2055–2.)
Rev. Proc. 2003–57
SECTION 1. PURPOSE
This revenue procedure contains an annotated sample declaration of trust and alternate provisions that meet the requirements of
§ 664(d)(1) of the Internal Revenue Code for a testamentary charitable remainder annuity trust (CRAT) providing for annuity payments
for one measuring life followed by the distribution of trust assets to a charitable remainderman.
SECTION 2. BACKGROUND
Previously, the Internal Revenue Service issued sample trust instruments for certain types of CRATs. The Service is updating the
previously issued samples and issuing new samples for additional types of CRATs; annotations and alternate sample provisions are
included as further guidance. In addition to the sample trust instrument included in this revenue procedure for a testamentary CRAT
providing for annuity payments for one measuring life, samples are provided in separate revenue procedures for:
(a)an inter vivos CRAT providing for annuity payments for one measuring life (see Rev. Proc. 2003–53, superceding Rev.
Proc. 89–21, 1989–1 C.B. 842);
(b)an inter vivos CRAT providing for annuity payments for a term of years (see Rev. Proc. 2003–54);
(c)an inter vivos CRAT providing for annuity payments payable consecutively for two measuring lives (see Rev. Proc.
2003–55, superceding section 4 of Rev. Proc. 90–32, 1990–1 C.B. 546);
(d)an inter vivos CRAT providing for annuity payments payable concurrently and consecutively for two measuring lives (see
Rev. Proc. 2003–56, superceding section 5 of Rev. Proc. 90–32);
(e)a testamentary CRAT providing for annuity payments for a term of years (see Rev. Proc. 2003–58);
(f)a testamentary CRAT providing for annuity payments payable consecutively for two measuring lives (see Rev. Proc.
2003–59, superceding section 7 of Rev. Proc. 90–32); and
(g)a testamentary CRAT providing for annuity payments payable concurrently and consecutively for two measuring lives (see
Rev. Proc. 2003–60, superceding section 8 of Rev. Proc. 90–32).
SECTION 3. SCOPE AND OBJECTIVE
Section 4 of this revenue procedure provides a sample declaration of trust for a testamentary CRAT with one measuring life that is
created by an individual who is a citizen or resident of the United States. Section 5 of this revenue procedure provides annotations to
the provisions of the sample trust. Section 6 of this revenue procedure provides samples of alternate provisions concerning: (.01) the
statement of the annuity amount as a specific dollar amount; (.02) the payment of part of the annuity to an organization described in
§ 170(c); (.03) a qualified contingency; (.04) the last annuity payment to the recipient; and (.05) a power of appointment to designate
the charitable remainderman.
For transfers to a qualifying CRAT, as defined in § 664(d)(1), the remainder interest will be deductible by the estate of a citizen or
resident of the United States under § 2055(e)(2)(A) if the other requirements of § 2055(e)(2)(A) (that is, the requirements not relating
to the provisions of the governing instrument) are also met. The Service will recognize a trust as a qualified CRAT meeting all of the
requirements of § 664(d)(1) if the trust operates in a manner consistent with the terms of the trust instrument, if the trust is a valid trust
under applicable local law, and if the trust instrument: (i) is substantially similar to the sample in section 4 of this revenue procedure;
or (ii) properly integrates one or more alternate provisions from section 6 of this revenue procedure into a document substantially
similar to the sample in section 4 of this revenue procedure. A trust instrument that contains substantive provisions in addition to those
provided in section 4 of this revenue procedure (other than properly integrated alternate provisions from section 6 of this revenue
procedure, or provisions necessary to establish a valid trust underapplicable local law that are not inconsistent with the applicable
federal tax requirements), or that omits any of the provisions of section 4 of this revenue procedure (unless an alternate provision
from section 6 of this revenue procedure is properly integrated), will not necessarily be disqualified, but neither will that trust be
assured of qualification under the provisions of this revenue procedure. The Service generally will not issue a letter ruling on whether
a testamentary trust created by an individual and with one measuring life qualifies as a CRAT. The Service, however, generally will
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issue letter rulings on the effect of substantive trust provisions, other than those contained in sections 4 and 6 of this revenue procedure,
on the qualification of a trust as a CRAT.
SECTION 4. SAMPLE TESTAMENTARY CHARITABLE REMAINDER ANNUITY TRUST — ONE
LIFE
I give, devise, and bequeath [property bequeathed] to my Trustee in trust to be administered under this provision. I intend this
bequest to establish a charitable remainder annuity trust, within the meaning of Rev. Proc. 2003–57 and § 664(d)(1) of the Internal
Revenue Code (hereinafter “the Code”). The trust shall be known as the
Charitable Remainder Annuity
Trust and I hereby designate
as the initial trustee (hereinafter “the Trustee”).
1.Payment of Annuity Amount. In each taxable year of the trust during the annuity period, the Trustee shall pay to [permissible
recipient] (hereinafter “the Recipient”) an annuity amount equal to [a number no less than 5 and no more than 50] percent of the
initial net fair market value of all property passing to this trust as finally determined for federal estate tax purposes. The first day of
the annuity period shall be the date of my death and the last day of the annuity period shall be the date of the Recipient’s death. The
annuity amount shall be paid in equal quarterly installments at the end of each calendar quarter from income, and to the extent income
is not sufficient, from principal. Any income of the trust for a taxable year in excess of the annuity amount shall be added to principal.
If the initial net fair market value of the trust assets is incorrectly determined, then within a reasonable period after the value is finally
determined for federal estate tax purposes, the Trustee shall pay to the Recipient (in the case of an undervaluation) or receive from the
Recipient (in the case of an overvaluation) an amount equal to thedifference between the annuity amount(s) properly payable and the
annuity amount(s) actually paid.
2.Deferral Provision. The obligation to pay the annuity amount shall commence with the date of my death, but payment of the
annuity amount may be deferred from this date until the end of the taxable year in which the trust is completely funded. Within a
reasonable time after the end of the taxable year in which the trust is completely funded, the Trustee must pay to the Recipient (in the
case of an underpayment) or receive from the Recipient (in the case of an overpayment) the difference between any annuity amounts
actually paid, plus interest, and the annuity amounts payable, plus interest. The interest shall be computed for any period at the rate
of interest, compounded annually, that the federal income tax regulations under § 664 of the Code prescribe for this computation.
3.Proration of Annuity Amount. The Trustee shall prorate the annuity amount on a daily basis for any short taxable year. In the
taxable year of the trust during which the annuity period ends, the Trustee shall prorate the annuity amount on a daily basis for the
number of days of the annuity period in that taxable year.
4.Distribution to Charity. At the termination of the annuity period, the Trustee shall distribute all of the then principal and income
of the trust (other than any amount due the Recipient or the Recipient’s estate under the provisions above) to [designated remainder-
man] (hereinafter “the Charitable Organization”). If the Charitable Organization is not an organization described in §§ 170(c) and
2055(a) of the Code at the time when any principal or income of the trust is to be distributed to it, then the Trustee shall distribute the
then principal and income to one or more organizations described in §§ 170(c) and 2055(a) of the Code as the Trustee shall select, and
in the proportions as the Trustee shall decide, in the Trustee’s sole discretion.
5.Additional Contributions. No additional contributions shall be made to the trust after the initial contribution. The initial contri-
bution, however, shall be deemed to consist of all property passing to the trust by reason of my death.
6.Prohibited Transactions. The Trustee shall not engage in any act of self-dealing within the meaning of § 4941(d) of the Code, as
modified by § 4947(a)(2)(A) of the Code, and shall not make any taxable expenditures within the meaning of § 4945(d) of the Code,
as modified by § 4947(a)(2)(A) of the Code.
7.Taxable Year. The taxable year of the trust shall be the calendar year.
8.Governing Law. The operation of the trust shall be governed by the laws of the State of
.How-
ever, the Trustee is prohibited from exercising any power or discretion granted under said laws that would be inconsistent with the
qualification of the trust as a charitable remainder annuity trust under § 664(d)(1) of the Code and the corresponding regulations.
9.Limited Power of Amendment. This trust is irrevocable. However, the Trustee shall have the power, acting alone, to amend the
trust from time to time in any manner required for the sole purpose of ensuring that the trust qualifies and continues to qualify as a
charitable remainder annuity trust within the meaning of § 664(d)(1) of the Code.
10.Investment of Trust Assets. Nothing in this trust instrument shall be construed to restrict the Trustee from investing the trust
assets in a manner that could result in the annual realization of a reasonable amount of income or gain from the sale or disposition of
trust assets.
SECTION 5. ANNOTATIONS REGARDING SAMPLE TESTAMENTARY CHARITABLE
REMAINDER ANNUITY TRUST — ONE LIFE
.01 Annotations for Introductory Paragraph of the Sample Trust.
(1)Factors concerning qualification of trust. A deduction must be allowable under § 2055 for property contributed to the trust.
Section 1.664–1(a)(1)(iii)(a) of the Income Tax Regulations. The trust must meet the definition of and function exclusively
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as a charitable remainder trust from the creation of the trust. Section 1.664–1(a)(4). Solely for purposes of § 664, a trust is
deemed created at the earliest time that no person is treated as the owner of the entire trust under subpart E, part 1, subchapter
J, chapter 1, subtitle A of the Code (subpart E). Section 1.664–1(a)(4). For purposes of § 2055, a charitable remainder trust
shall be deemed created at the date of death of the decedent (even though the trust is not funded until the end of a reasonable
period of administration or settlement) if the obligation to pay the annuity amount with respect to the property passing in
trust at the death of the decedent begins as of the date of death of the decedent, even though the requirement to pay this
amount is deferred in accordance with § 1.664–1(a)(5)(i). Section 1.664–1(a)(5)(i). In addition, funding the trust with
certain types of assets may disqualify it as a charitable remainder trust. See § 1.664–1(a)(7) and Rev. Rul. 73–610, 1973–2
C.B. 213.
(2)Valuation of unmarketable assets. If the trust is funded with unmarketable assets, the initial net fair market value of the
assets must be determined exclusively by an independent trustee, as defined in § 1.664–1(a)(7)(iii), or must be determined
by a current “qualified appraisal” from a “qualified appraiser,” as defined in § 1.170A–13(c)(3) and (c)(5), respectively.
Section 1.664–1(a)(7).
(3)Trustee provisions. Alternate or successor trustees may be designated in the trust instrument. In addition, the trust instru-
ment may contain other administrative provisions relating to the trustee’s duties and powers, as long as the provisions do
not conflict with the rules governing charitable remainder trusts under § 664 and the regulations thereunder.
.02 Annotations for Paragraph 1, Payment of Annuity Amount, of the Sample Trust.
(1)Permissible recipients. For a CRAT with an annuity period based on the life of one individual, the annuity amount must
generally be paid to that individual and the individual must be living at the time of the creation of the trust. See Rev. Rul.
2002–20, 2002–1 C.B. 794, for situations in which the annuity amount may be paid to a trust for the benefit of an individual
who is financially disabled. An organization described in § 170(c) may receive part, but not all, of the annuity amount.
Section 664(d)(1)(A) and § 1.664–2(a)(3)(i). See section 6.02 of this revenue procedure for an alternate provision that
provides for payment of part of the annuity to an organization described in § 170(c).
(2)Percentage requirements. The sum certain annuity amount must be at least 5 percent and not more than 50 percent of the
initial net fair market value of the assets placed in trust. Section 664(d)(1)(A). Even if the sum certain annuity amount is at
least 5 percent and not more than 50 percent of the initial net fair market value of the assets placed in trust, no deduction will
be allowable under § 2055 if the probability that the trust corpus will be exhausted before the death of the recipient exceeds
5 percent. Rev. Rul. 77–374, 1977–2 C.B. 329. See § 20.7520–3(b) for special rules that may be applicable in valuing
interests transferred to CRATs. In addition, the value (determined under § 7520) of the charitable remainder interest must
be at least 10 percent of the initial net fair market value of all property placed in the trust. Section 664(d)(1)(D).
(3)Payment of annuity amount in installments. Paragraph 1, Payment of Annuity Amount, of the sample trust specifies that
the annuity amount is to be paid in equal quarterly installments at the end of each quarter. However, the trust instrument
may specify that the annuity amount is to be paid to the recipient annually or in equal or unequal installments throughout
the year. See § 1.664–2(a)(1)(i). The amount of the charitable deduction will be affected by the frequency of payment, by
whether the installments are equal or unequal, and by whether each installment is payable at the beginning or end of the
period. See § 1.664–2(c) and § 20.2031–7(d)(2)(iv).
(4)Payment of annuity amount by close of taxable year. Generally, the annuity amount for any taxable year must be paid before
the close of the taxable year for which it is due. For circumstances under which the annuity amount may be paid within
a reasonable time after the close of the taxable year, see § 1.664–2(a)(1)(i)(a). In addition, § 1.664–1(a)(5)(i) provides a
special rule applicable to charitable remainder trusts created bytestamentary transfer that may defer the requirement to pay
the annuity amount until the end of the taxable year in which the trust is completely funded. See section 5.03(1) of this
revenue procedure for additional information regarding the deferral of the payment of the annuity amount until the end of
the taxable year in which thetrust is completely funded.
(5)Early distributions to charity. The trust instrument may provide that an amount other than the annuity shall be paid (or
may be paid in the discretion of the trustee) to an organization described in § 170(c). If such a distribution is made in kind,
the adjusted basis of the property distributed must be fairly representative of the adjusted basis of the property available for
distribution on the date of distribution. Section 1.664–2(a)(4).
.03 Annotations for Paragraph 2, Deferral Provision, of the Sample Trust.
(1)Deferral of requirement to pay annuity amount. The deferral provision in paragraph 2 of the sample trust authorizes defer-
ring the payment of the annuity amount until the end of the taxable year of the trust in which the trust is completely funded.
Section 1.664–1(a)(5)(i) provides the operational rule for deferring payment of the annuity amount in this circumstance.
(2)Treatment of distributions. For the proper treatment of distributions to a charitable remainder trust or to the recipient
during the period of administration of an estate or settlement of a trust that is not a charitable remainder trust, see
§ 1.664–1(a)(5)(iii).
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.04 Annotations for Paragraph 3, Proration of Annuity Amount, of the Sample Trust.
(1)Prorating annuity amount. To compute the annuity amount in a short taxable year and in the taxable year in which the
annuity period terminates, see § 1.664–2(a)(1)(iv)(a)and(b), respectively.
(2)Determining annuity amount payable in year of recipient’s death. Paragraph 3, Proration of Annuity Amount, of the sample
trust specifies that the annuity amount shall be prorated on adaily basis. See section 6.04 of this revenue procedure for
an alternate provision that provides for the termination of the annuity amount with the last regular payment preceding the
recipient’s death.
.05 Annotations for Paragraph 4, Distribution to Charity, of the Sample Trust.
(1)Minimum value of remainder. As noted in section 5.02(2) of this revenue procedure, the value (determined under § 7520)
of the charitable remainder interest is required to be at least 10 percent of the initial net fair market value of all property
placed in the trust. Section 664(d)(1)(D).
(2)Designated remainderman. Any named charitable remainderman must be an organization described in §§ 170(c) and
2055(a) at the time of the transfer to the charitable remainder annuity trust. See § 664(d)(1)(C) and Rev. Rul. 77–385,
1977–2 C.B. 331. The trust instrument may restrict the charitable remainderman to an organization described in §§ 170(c)
and 2055(a), but grant to a trustee or other person the power to designate the actual charitable remainderman. See section
6.05 of this revenue procedure for an alternate provision in which the recipient is granted a power of appointment to des-
ignate the charitable remainderman.
(3)Multiple remaindermen. The remainder interest may pass to more than one charitable organization as long as each organi-
zation is described in §§ 170(c) and 2055(a). Section 1.664–2(a)(6)(i).
(4)Alternative remaindermen. The trust instrument of a CRAT must provide a means for selecting alternative charitable re-
maindermen in the event the designated organization is not qualified at the time any payments are to be made to it from the
trust. Section 1.664–2(a)(6)(iv).
.06 Annotations for Paragraph 6, Prohibited Transactions, of the Sample Trust.
(1)Payment of the annuity amount. Payment of the annuity amount to the recipient is not considered an act of self-dealing
within the meaning of § 4941(d), as modified by § 4947(a)(2)(A), or a taxable expenditure within the meaning of § 4945(d),
as modified by § 4947(a)(2)(A). Section 53.4947–1(c)(2) of the Foundation and Similar Excise Taxes Regulations.
(2)Prohibitions against certain investments and excess business holdings. Prohibitions against investments that jeopardize
the exempt purpose of the trust for purposes of § 4944, as modified by § 4947(a)(2)(A), and against retaining any excess
business holdings for purposes of § 4943, as modified by § 4947(a)(2)(A), are required if the trust provides for payment of
part of an annuity amount to an organization described in § 170(c) and an estate tax charitable deduction is sought for this
interest. See § 4947(b)(3). See section 6.02 of this revenue procedure for an alternate provision that provides for payment
ofpartoftheannuitytoanorganizationdescribedin§170(c).
(3)Trust to continue in existence for benefit of charity. The governing instrument requirements of § 508(e) must be included
in the trust instrument if, after the termination of the annuity period: (i) the trust instrument provides that the trust shall
continue in existence for the benefit of the charitable remainderman and, as a result, the trust will become subject to the
provisions of § 4947(a)(1); and (ii) the trust will be treated as a private foundation within the meaning of § 509(a), as mod-
ified by § 4947(a)(1). Except as provided in paragraph 6 of the sample trust, the trust instrument may limit the application
of the provisions of § 508(e) to the period after the termination of the annuity period when the trust continues in existence
for the benefit of the charitable remainderman.
SECTION 6. ALTERNATE PROVISIONS FOR SAMPLE TESTAMENTARY CHARITABLE
REMAINDER ANNUITY TRUST — ONE LIFE
.01 Annuity Amount Stated as a Specific Dollar Amount.
(1)Explanation. As an alternative to stating the annuity amount as a fraction or percentage of the initial net fair market value
of the assets transferred to the trust, the annuity amount may be stated as a specific dollar amount. Section 1.664–2(a)(1)(ii)
and (iii). In either case, the annuity amount must be not less than 5 percent nor more than 50 percent of the initial net fair
market value of all property placed in trust. Section 664(d)(1)(A).
(2)Instructions for use.
(a)Replace the first sentence of paragraph 1, Payment of Annuity Amount, of the sample trust with the following sentence:
In each taxable year of the trust during the annuity period, the Trustee shall pay to [permissible recipient](hereinafter
“the Recipient”) an annuity amount equal to [the stated dollar amount].
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(b)Delete the last sentence of paragraph 1, Payment of Annuity Amount, of the sample trust concerning the incorrect valu-
ation of trust assets.
.02 Payment of Part of the Annuity to an Organization Described in § 170(c).
(1)Explanation. An organization described in § 170(c) may receive part, but not all, of any annuity amount. Section
664(d)(1)(A). If an estate tax charitable deduction is sought for the present value of the annuity interest passing to a
charitable organization, the trust instrument must contain additional provisions. First, the trust instrument must specify the
portion of each annuity payment that is payable to the noncharitable recipient and to the charitable organization described
in §§ 170(c) and 2055(a). Second, the trust instrument must contain a means for selecting an alternative qualified
charitable organization if the designated organization is not a qualified organization at the time when any annuity amount
is to be paid to it. Third, the trust instrument must contain prohibitions against investments that jeopardize the exempt
purpose of the trust for purposes of § 4944, as modified by § 4947(a)(2)(A), and against retaining any excess business
holdings for purposes of § 4943, as modified by § 4947(a)(2)(A).
(2)Instructions for use.
(a)Replace paragraph 1, Payment of Annuity Amount, of the sample trust with the following paragraph:
Payment of Annuity Amount. The annuity amount is equal to [a number no less than 5 and no more than 50] percent
of the initial net fair market value of all property passing to this trust as finally determined for federal estate tax
purposes. In each taxable year of the trust during the annuity period, the Trustee shall pay [the percentage of the
annuity amount payable to the noncharitable recipient] percent of the annuity amount to [permissible recipient]
(hereinafter “the Recipient”) and [the percentage of the annuity amount payable to the charitable recipient] percent of
the annuity amount to [an organization described in §§ 170(c) and 2055(a) of the Code] (hereinafter “the Charitable
Recipient”). The first day of the annuity period shall be the date of my death and the last day of the annuity period
shall be the date of the Recipient’s death. If the Charitable Recipient is not an organization described in §§ 170(c) and
2055(a) of the Code at the time when any annuity payment is to be distributed to it, then the Trustee shall distribute
that annuity payment to one or more organizations described in §§ 170(c) and 2055(a) of the Code as the Trustee shall
select, and in the proportions as the Trustee shall decide, in the Trustee’s sole discretion. The annuity amount shall be
paid in equal quarterly installments at the end of each calendar quarter from income, and to the extent income is not
sufficient, from principal. Any income of the trust for a taxable year in excess of the annuity amount shall be added
to principal. If the initial net fair market value of the trust assets is incorrectly determined, then within a reasonable
period after the value is finally determined for federal estate tax purposes, the Trustee shall pay to the Recipient and
the Charitable Recipient (in the case of an undervaluation)or receive from the Recipient and the Charitable Recipient
(in the case of an overvaluation) an amount equal to the difference between the annuity amount(s) properly payable
and the annuity amount(s) actually paid.
(b)In paragraph 2, Deferral Provision, of the sample trust, replace each reference to “the Recipient” with a reference to “the
Recipient and the Charitable Recipient.”
(c)Replace the first parenthetical in paragraph 4, Distribution to Charity, of the sample trust with the following parenthetical:
(other than any amount due the Recipient or the Recipient’s estate and the Charitable Recipient under the provisions
above).
(d)Add the following sentence after the first and only sentence in paragraph 6, Prohibited Transactions, of the sample trust:
The Trustee shall not make any investments that jeopardize the exempt purpose of the trust for purposes of § 4944 of
the Code, as modified by § 4947(a)(2)(A) of the Code, or retain any excess business holdings for purposes of § 4943
of the Code, as modified by § 4947(a)(2)(A) of the Code.
.03 Qualified Contingency.
(1)Explanation. Under § 664(f), payment of the annuity amount may terminate upon the earlier of the occurrence of a qualified
contingency (as defined in § 664(f)(3)) or the death of the recipient. The amount of the charitable deduction, however, will
be determined without regard to a qualified contingency. See § 664(f)(2).
(2)Instruction for use. Replace the second sentence of paragraph 1, Payment of Annuity Amount, of the sample trust with the
following sentence:
The first day of the annuity period shall be the date of my death and the last day of the annuity period shall be the date
of the Recipient’s death or, if earlier, the date on which occurs the [qualified contingency].
.04 Last Annuity Payment to the Recipient.
(1)Explanation. As an alternative to prorating the annuity amount in the taxable year of the recipient’s death, payment of the
annuity amount may terminate with the last regular payment preceding the recipient’s death. However, the fact that the
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recipient may not receive the last payment shall not be taken into account for purposes of determining the present value of
the remainder interest. Section 1.664–2(a)(5)(i).
(2)Instruction for use. Replace the second sentence of paragraph 3, Proration of Annuity Amount, of the sample trust with the
following sentence:
In the taxable year of the trust during which the annuity period ends, the obligation of the Trustee to pay the annuity
amount shall terminate with the regular quarterly installment next preceding the death of the Recipient.
.05 Power of Appointment to Designate the Charitable Remainderman.
(1)Explanation. The trust instrument may grant the recipient a power of appointment to designate the charitable remainderman.
See Rev. Rul. 76–7, 1976–1 C.B. 179.
(2)Instruction for use. Replace paragraph 4, Distribution to Charity, of the sample trust with the following paragraph:
Distribution to Charity. At the termination of the annuity period, the Trustee shall distribute all of the then principal and
income of the trust (other than any amount due the Recipient or the Recipient’s estate under the provisions above) to
one or more charitable organizations described in §§ 170(c) and 2055(a) of the Code as the Recipient shall appoint and
direct by specific reference to this power of appointment by inter vivos or testamentary instrument. To the extent the
Recipient fails to effectively exercise the power of appointment, the principal and income not effectively appointed shall
be distributed to one or more organizations described in §§ 170(c) and 2055(a) of the Code as the Trustee shall select,
and in the proportions as the Trustee shall decide, in the Trustee’s sole discretion. If an organization fails to qualify as
an organization described in §§ 170(c) and 2055(a) of the Code at the time when any principal or income of the trust
is to be distributed to it, then the Trustee shall distribute the then principal and income to one or more organizations
described in §§ 170(c) and 2055(a) of the Code as the Trusteeshall select, and in the proportions as the Trustee shall
decide, in the Trustee’s sole discretion.
SECTION 7. EFFECT ON OTHER REVENUE PROCEDURES
Section 6 of Rev. Proc. 90–32 is superseded.
DRAFTING INFORMATION
The principal authors of this revenue procedure are Karlene M. Lesho and Stephanie N. Bland of the Office of Associate Chief
Counsel (Passthroughs and Special Industries). For further information regarding this revenue procedure, contact Karlene M. Lesho
or Stephanie N. Bland at (202) 622–7830 (not a toll-free call).
26 CFR 601.201: Rulings and determination letters.
(Also Part I, §§ 170, 664, 2055; 1.644–2, 20.2055–2.)
Rev. Proc. 2003–58
SECTION 1. PURPOSE
This revenue procedure contains an annotated sample declaration of trust and alternate provisions that meet the requirements of
§ 664(d)(1) of the Internal Revenue Code for a testamentary charitable remainder annuity trust (CRAT) providing for annuity payments
for a term of years followed by the distribution of trust assets to a charitable remainderman.
SECTION 2. BACKGROUND
Previously, the Internal Revenue Service issued sample trust instruments for certain types of CRATs. The Service is updating the
previously issued samples and issuing new samples for additional types of CRATs; annotations and alternate sample provisions are
included as further guidance. In addition to the sample trust instrument included in this revenue procedure for a testamentary CRAT
providing for annuity payments for a term of years, samples are provided in separate revenue procedures for:
(a)an inter vivos CRAT providing for annuity payments for one measuring life (see Rev. Proc. 2003–53, superceding Rev.
Proc. 89–21, 1989–1 C.B. 842);
(b)an inter vivos CRAT providing for annuity payments for a term of years (see Rev. Proc. 2003–54);
(c)an inter vivos CRAT providing for annuity payments payable consecutively for two measuring lives (see Rev. Proc.
2003–55, superceding section 4 of Rev. Proc. 90–32, 1990–1 C.B. 546);
(d)an inter vivos CRAT providing for annuity payments payable concurrently and consecutively for two measuring lives (see
Rev. Proc. 2003–56, superceding section 5 of Rev. Proc. 90–32);
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(e)a testamentary CRAT providing for annuity payments for one measuring life (see Rev. Proc. 2003–57, superceding section
6 of Rev. Proc. 90–32);
(f)a testamentary CRAT providing for annuity payments payable consecutively for two measuring lives (see Rev. Proc.
2003–59, superceding section 7 of Rev. Proc. 90–32); and
(g)a testamentary CRAT providing for annuity payments payable concurrently and consecutively for two measuring lives (see
Rev. Proc. 2003–60, superceding section 8 of Rev. Proc. 90–32).
SECTION 3. SCOPE AND OBJECTIVE
Section 4 of this revenue procedure provides a sample declaration of trust for a testamentary CRAT that is created by an individual
who is a citizen or resident of the United States and that provides for a term of years annuity period. Section 5 of this revenue procedure
provides annotations to the provisions of the sample trust. Section 6 of this revenue procedure provides samples of alternate provisions
concerning: (.01) the statement of the annuity amount as a specific dollar amount; (.02) the payment of part of the annuity to an
organization described in § 170(c); (.03) the apportionment of the annuity amount among members of a named class in the discretion
of the trustee; (.04) a qualified contingency; and (.05) a power of appointment to designate the charitable remainderman.
For transfers to a qualifying CRAT, as defined in § 664(d)(1), the remainder interest will be deductible by the estate of a citizen or
resident of the United States under § 2055(e)(2)(A) if the other requirements of § 2055(e)(2)(A) (that is, the requirements not relating
to the provisions of the governing instrument) are also met. The Service will recognize a trust as a qualified CRAT meeting all of the
requirements of § 664(d)(1) if the trust operates in a manner consistent with the terms of the trust instrument, if the trust is a valid trust
under applicable local law, and if the trust instrument: (i) is substantially similar to the sample in section 4 of this revenue procedure;
or (ii) properly integrates one or more alternate provisions from section 6 of this revenue procedure into a document substantially
similar to the sample in section 4 of this revenue procedure. A trust instrument that contains substantive provisions in addition to those
provided in section 4 of this revenue procedure (other than properly integrated alternate provisions from section 6 of this revenue
procedure, or provisions necessary to establish a valid trust underapplicable local law that are not inconsistent with the applicable
federal tax requirements), or that omits any of the provisions of section 4 of this revenue procedure (unless an alternate provision
from section 6 of this revenue procedure is properly integrated), will not necessarily be disqualified, but neither will that trust be
assured of qualification under the provisions of this revenue procedure. The Service generally will not issue a letter ruling on whether
a testamentary trust created by an individual and having a term of years annuity period qualifies as a CRAT. The Service, however,
generally will issue letter rulings on the effect of substantive trust provisions, other than those contained in sections 4 and 6 of this
revenue procedure, on the qualification of a trust as a CRAT.
SECTION 4. SAMPLE TESTAMENTARY CHARITABLE REMAINDER ANNUITY TRUST — TERM
OF YEARS
I give, devise, and bequeath [property bequeathed] to my Trustee in trust to be administered under this provision. I intend this
bequest to establish a charitable remainder annuity trust, within the meaning of Rev. Proc. 2003–58 and § 664(d)(1) of the Internal
Revenue Code (hereinafter “the Code”). The trust shall be known as the
Charitable Remainder Annuity
Trust and I hereby designate
as the initial trustee (hereinafter “the Trustee”).
1.Payment of Annuity Amount. In each taxable year of the trust during the annuity period, the Trustee shall pay to [permissible
recipient] (hereinafter “the Recipient”) an annuity amount equal to [a number no less than 5 and no more than 50] percent of the initial
net fair market value of all property passing to this trust as finally determined for federal estate tax purposes. The annuity period is a
term of [a number not more than 20] years. The first day of the annuity period shall be the date of my death and the last day of the
annuity period shall be the day preceding the [ordinal number corresponding to the length of the annuity period] anniversary of that
date. The annuity amount shall be paid in equal quarterly installments at the end of each calendar quarter from income, and to the
extent income is not sufficient, from principal. Any income of the trust for a taxable year in excess of the annuity amount shall be added
to principal. If the initial net fair market value of the trust assets is incorrectly determined, then within a reasonable period after the
value is finally determined for federal estate tax purposes, the Trustee shall pay to the Recipient (in the case of an undervaluation) or
receive from the Recipient (in the case of an overvaluation) an amountequal to the difference between the annuity amount(s) properly
payable and the annuity amount(s) actually paid.
2.Deferral Provision. The obligation to pay the annuity amount shall commence with the date of my death, but payment of the
annuity amount may be deferred from this date until the end of the taxable year in which the trust is completely funded. Within a
reasonable time after the end of the taxable year in which the trust is completely funded, the Trustee must pay to the Recipient (in the
case of an underpayment) or receive from the Recipient (in the case of an overpayment) the difference between any annuity amounts
actually paid, plus interest, and the annuity amounts payable, plus interest. The interest shall be computed for any period at the rate
of interest, compounded annually, that the federal income tax regulations under § 664 of the Code prescribe for this computation.
3.Proration of Annuity Amount. The Trustee shall prorate the annuity amount on a daily basis for any short taxable year. In the
taxable year of the trust during which the annuity period ends, the Trustee shall prorate the annuity amount on a daily basis for the
number of days of the annuity period in that taxable year.
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4.Distribution to Charity. At the termination of the annuity period, the Trustee shall distribute all of the then principal and income
of the trust (other than any amount due the Recipient under the provisions above) to [designated remainderman] (hereinafter “the
Charitable Organization”). If the Charitable Organization is not an organization described in §§ 170(c) and 2055(a) of the Code at the
time when any principal or income of the trust is to be distributed to it, then the Trustee shall distribute the then principal and income
to one or more organizations described in §§ 170(c) and 2055(a) of the Code as the Trustee shall select, and in the proportions as the
Trustee shall decide, in the Trustee’s sole discretion.
5.Additional Contributions. No additional contributions shall be made to the trust after the initial contribution. The initial contri-
bution, however, shall be deemed to consist of all property passing to the trust by reason of my death.
6.Prohibited Transactions. The Trustee shall not engage in any act of self-dealing within the meaning of § 4941(d) of the Code, as
modified by § 4947(a)(2)(A) of the Code, and shall not make any taxable expenditures within the meaning of § 4945(d) of the Code,
as modified by § 4947(a)(2)(A) of the Code.
7.Taxable Year. The taxable year of the trust shall be the calendar year.
8.Governing Law. The operation of the trust shall be governed by the laws of the State of
.However,the
Trustee is prohibited from exercising any power or discretion granted under said laws that would be inconsistent with the qualification
of the trust as a charitable remainder annuity trust under § 664(d)(1) of the Code and the corresponding regulations.
9.Limited Power of Amendment. This trust is irrevocable. However, the Trustee shall have the power, acting alone, to amend the
trust from time to time in any manner required for the sole purpose of ensuring that the trust qualifies and continues to qualify as a
charitable remainder annuity trust within the meaning of § 664(d)(1) of the Code.
10.Investment of Trust Assets. Nothing in this trust instrument shall be construed to restrict the Trustee from investing the trust
assets in a manner that could result in the annual realization of a reasonable amount of income or gain from the sale or disposition of
trust assets.
SECTION 5. ANNOTATIONS REGARDING SAMPLE TESTAMENTARY CHARITABLE
REMAINDER ANNUITY TRUST — TERM OF YEARS
.01 Annotations for Introductory Paragraph of the Sample Trust.
(1)Factors concerning qualification of trust. A deduction must be allowable under § 2055 for property contributed to the trust.
Section 1.664–1(a)(1)(iii)(a) of the Income Tax Regulations. The trust must meet the definition of and function exclusively
as a charitable remainder trust from the creation of the trust. Section 1.664–1(a)(4). Solely for purposes of § 664, a trust is
deemed created at the earliest time that no person is treated as the owner of the entire trust under subpart E, part 1, subchapter
J, chapter 1, subtitle A of the Code (subpart E). Section 1.664–1(a)(4). For purposes of § 2055, a charitable remainder trust
shall be deemed created at the date of death of the decedent (even though the trust is not funded until the end of a reasonable
period of administration or settlement) if the obligation to pay the annuity amount with respect to the property passing in
trust at the death of the decedent begins as of the date of death of the decedent, even though the requirement to pay this
amount is deferred in accordance with § 1.664–1(a)(5)(i). Section 1.664–1(a)(5)(i). In addition, funding the trust with
certain types of assets may disqualify it as a charitable remainder trust. See § 1.664–1(a)(7) and Rev. Rul. 73–610, 1973–2
C.B. 213.
(2)Valuation of unmarketable assets. If the trust is funded with unmarketable assets, the initial net fair market value of the
assets must be determined exclusively by an independent trustee, as defined in § 1.664–1(a)(7)(iii), or must be determined
by a current “qualified appraisal” from a “qualified appraiser,” as defined in § 1.170A–13(c)(3) and (c)(5), respectively.
Section 1.664–1(a)(7).
(3)Trustee provisions. Alternate or successor trustees may be designated in the trust instrument. In addition, the trust in-
strument may contain other administrative provisions relating to the trustee’s duties and powers, as long as the provisions
do not conflict with the rules governing charitable remainder trusts under § 664 and the regulations thereunder. Note that
certain powers given to certain persons serving as the trustee may cause the trustee to be treated as the owner of the trust
under subpart E and thus disqualify the trust as a charitable remainder trust. See § 1.664–1(a)(4). See section 6.03 of this
revenue procedure for an alternate provision providing for the apportionment of the annuity amount among members of a
named class in the discretion of the trustee.
.02 Annotations for Paragraph 1, Payment of Annuity Amount, of the Sample Trust.
(1)Permissible term. The period for which the annuity amount is payable must not exceed 20 years. Section 1.664–2(a)(5)(i).
Thus, for example, the annuity period of a CRAT for a term of 20 years will end on the day preceding the twentieth an-
niversary of the date the trust was created.
(2)Permissible recipients. For a CRAT having a term of years annuity period, the annuity amount must generally be paid to
a named person or persons (within the meaning of § 7701(a)(1)). If the annuity amount is to be paid to an individual or
individuals, all the individuals must be living at the time of the creation of the trust. The annuity amount may be payable to
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the estate or heirs of a named recipient who dies prior to theexpiration of the term of years. See Rev. Rul. 74–39, 1974–1
C.B. 156. The annuity amount may be payable to members of a named class and, because the annuity period is for a term
of years, all of the members of the class need not be living or ascertainable at the creation of the trust. An organization
described in § 170(c) may receive part, but not all, of the annuity amount. Section 664(d)(1)(A) and § 1.664–2(a)(3)(i).
See section 6.02 of this revenue procedure for an alternate provision that provides for payment of part of the annuity to an
organization described in § 170(c).
(3)Multiple noncharitable recipients. Generally, if the annuity amount is payable to more than one person, the trust instrument
should describe the interest of each person. See section 6.03 of this revenue procedure for an alternate provision providing
for the apportionment of the annuity amount among members of a named class in the discretion of the trustee.
(4)Percentage requirements. The sum certain annuity amount must be at least 5 percent and not more than 50 percent of the
initial net fair market value of the assets placed in trust. Section 664(d)(1)(A). In addition, the value (determined under
§ 7520) of the charitable remainder interest must be at least 10 percent of the initial net fair market value of all property
placed in the trust. Section 664(d)(1)(D). See § 20.7520–3(b) for special rules that may be applicable in valuing interests
transferredtoCRATs.
(5)Payment of annuity amount in installments. Paragraph 1, Payment of Annuity Amount, of the sample trust specifies that
the annuity amount is to be paid in equal quarterly installments at the end of each quarter. However, the trust instrument
may specify that the annuity amount is to be paid to the recipient annually or in equal or unequal installments throughout
the year. See § 1.664–2(a)(1)(i). The amount of the charitable deduction will be affected by the frequency of payment, by
whether the installments are equal or unequal, and by whether each installment is payable at the beginning or end of the
period. See § 1.664–2(c) and § 20.2031–7(d)(2)(iv).
(6)Payment of annuity amount by close of taxable year. Generally, the annuity amount for any taxable year must be paid before
the close of the taxable year for which it is due. For circumstances under which the annuity amount may be paid within
a reasonable time after the close of the taxable year, see § 1.664–2(a)(1)(i)(a). In addition, § 1.664–1(a)(5)(i) provides a
special rule applicable to charitable remainder trusts created bytestamentary transfer that may defer the requirement to pay
the annuity amount until the end of the taxable year in which the trust is completely funded. See section 5.03(1) of this
revenue procedure for additional information regarding the deferral of the payment of the annuity amount until the end of
the taxable year in which thetrust is completely funded.
(7)Early distributions to charity. The trust instrument may provide that an amount other than the annuity shall be paid (or
may be paid in the discretion of the trustee) to an organization described in § 170(c). If such a distribution is made in kind,
the adjusted basis of the property distributed must be fairly representative of the adjusted basis of the property available for
distribution on the date of distribution. Section 1.664–2(a)(4).
.03 Annotations for Paragraph 2, Deferral Provision, of the Sample Trust.
(1)Deferral of requirement to pay annuity amount. The deferral provision in paragraph 2 of the sample trust authorizes defer-
ring the payment of the annuity amount until the end of the taxable year of the trust in which the trust is completely funded.
Section 1.664–1(a)(5)(i) provides the operational rule for deferring payment of the annuity amount in this circumstance.
(2)Treatment of distributions. For the proper treatment of distributions to a charitable remainder trust or to the recipient
during the period of administration of an estate or settlement of a trust that is not a charitable remainder trust, see
§ 1.664–1(a)(5)(iii).
.04 Annotation for Paragraph 3, Proration of Annuity Amount, of the Sample Trust.
(1)Prorating annuity amount. To compute the annuity amount in a short taxable year and in the taxable year in which the
annuity period terminates, see § 1.664–2(a)(1)(iv)(a)and(b), respectively.
.05 Annotations for Paragraph 4, Distribution to Charity, of the Sample Trust.
(1)Minimum value of remainder. As noted in section 5.02(4) of this revenue procedure, the value (determined under § 7520)
of the charitable remainder interest is required to be at least 10 percent of the initial net fair market value of all property
placed in the trust. Section 664(d)(1)(D).
(2)Designated remainderman. Any named charitable remainderman must be an organization described in §§ 170(c) and
2055(a) at the time of the transfer to the charitable remainder annuity trust. See § 664(d)(1)(C) and Rev. Rul. 77–385,
1977–2 C.B. 331. The trust instrument may restrict the charitable remainderman to an organization described in §§ 170(c)
and 2055(a), but grant to a trustee or other person the power to designate the actual charitable remainderman. See section
6.05 of this revenue procedure for an alternate provision in which a recipient is granted a power of appointment to designate
the charitable remainderman.
(3)Multiple remaindermen. The remainder interest may pass to more than one charitable organization as long as each organi-
zation is described in §§ 170(c) and 2055(a). Section 1.664–2(a)(6)(i).
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(4)Alternative remaindermen. The trust instrument of a CRAT must provide a means for selecting alternative charitable re-
maindermen in the event the designated organization is not qualified at the time any payments are to be made to it from the
trust. Section 1.664–2(a)(6)(iv).
.06 Annotations for Paragraph 6, Prohibited Transactions, of the Sample Trust.
(1)Payment of the annuity amount. Payment of the annuity amount to the recipient is not considered an act of self-dealing
within the meaning of § 4941(d), as modified by § 4947(a)(2)(A), or a taxable expenditure within the meaning of § 4945(d),
as modified by § 4947(a)(2)(A). Section 53.4947–1(c)(2) of the Foundation and Similar Excise Taxes Regulations.
(2)Prohibitions against certain investments and excess business holdings. Prohibitions against investments that jeopardize
the exempt purpose of the trust for purposes of § 4944, as modified by § 4947(a)(2)(A), and against retaining any excess
business holdings for purposes of § 4943, as modified by § 4947(a)(2)(A), are required if the trust provides for payment of
part of an annuity amount to an organization described in § 170(c) and an estate tax charitable deduction is sought for this
interest. See § 4947(b)(3). See section 6.02 of this revenue procedure for an alternate provision that provides for payment
ofpartoftheannuitytoanorganizationdescribedin§170(c).
(3)Trust to continue in existence for benefit of charity. The governing instrument requirements of § 508(e) must be included
in the trust instrument if, after the termination of the annuity period: (i) the trust instrument provides that the trust shall
continue in existence for the benefit of the charitable remainderman and, as a result, the trust will become subject to the
provisions of § 4947(a)(1); and (ii) the trust will be treated as a private foundation within the meaning of § 509(a), as mod-
ified by § 4947(a)(1). Except as provided in paragraph 6 of the sample trust, the trust instrument may limit the application
of the provisions of § 508(e) to the period after the termination of the annuity period when the trust continues in existence
for the benefit of the charitable remainderman.
SECTION 6. ALTERNATE PROVISIONS FOR SAMPLE TESTAMENTARY CHARITABLE
REMAINDER ANNUITY TRUST — TERM OF YEARS
.01 Annuity Amount Stated as a Specific Dollar Amount.
(1)Explanation. As an alternative to stating the annuity amount as a fraction or percentage of the initial net fair market value
of the assets transferred to the trust, the annuity amount may be stated as a specific dollar amount. Section 1.664–2(a)(1)(ii)
and (iii). In either case, the annuity amount must be not less than 5 percent nor more than 50 percent of the initial net fair
market value of all property placed in trust. Section 664(d)(1)(A).
(2)Instructions for use.
(a)Replace the first sentence of paragraph 1, Payment of Annuity Amount, of the sample trust with the following sentence:
In each taxable year of the trust during the annuity period, the Trustee shall pay to [permissible recipient](hereinafter
“the Recipient”) an annuity amount equal to [the stated dollar amount].
(b)Delete the last sentence of paragraph 1, Payment of Annuity Amount, of the sample trust concerning the incorrect valu-
ation of trust assets.
.02 Payment of Part of the Annuity to an Organization Described in § 170(c).
(1)Explanation. An organization described in § 170(c) may receive part, but not all, of any annuity amount. Section
664(d)(1)(A). If an estate tax charitable deduction is sought for the present value of the annuity interest passing to a
charitable organization, the trust instrument must contain additional provisions. First, the trust instrument must specify the
portion of each annuity payment that is payable to the noncharitable recipient and to the charitable organization described
in §§ 170(c) and 2055(a). Second, the trust instrument must contain a means for selecting an alternative qualified
charitable organization if the designated organization is not a qualified organization at the time when any annuity amount
is to be paid to it. Third, the trust instrument must contain prohibitions against investments that jeopardize the exempt
purpose of the trust for purposes of § 4944, as modified by § 4947(a)(2)(A), and against retaining any excess business
holdings for purposes of § 4943, as modified by § 4947(a)(2)(A).
(2)Instructions for use.
(a)Replace paragraph 1, Payment of Annuity Amount, of the sample trust with the following paragraph:
Payment of Annuity Amount. The annuity amount is equal to [a number no less than 5 and no more than 50] percent of
the initial net fair market value of all property passing to this trust as finally determined for federal estate tax purposes.
In each taxable year of the trust during the annuity period, the Trustee shall pay [the percentage of the annuity amount
payable to the noncharitable recipient] percent of the annuity amount to [permissible recipient] (hereinafter “the
Recipient”) and [the percentage of the annuity amount payable to the charitable recipient] percent of the annuity
amount to [an organization described in §§ 170(c) and 2055(a) of the Code] (hereinafter “the Charitable Recipient”).
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Theannuityperiodisatermof[not more than 20] years. The first day of the annuity period shall be the date of
my death and the last day of the annuity period shall be the day preceding the [ordinal number corresponding to the
length of the annuity period] anniversary of that date. If the Charitable Recipient is not an organization described in
§§ 170(c) and 2055(a) of the Code at the time when any annuity payment is to be distributed to it, then the Trustee
shall distribute that annuity payment to one or more organizations described in §§ 170(c) and 2055(a) of the Code
as the Trustee shall select, and in the proportions as the Trustee shall decide, in the Trustee’s sole discretion. The
annuity amount shall be paid in equal quarterly installments at the end of each calendar quarter from income, and to
the extent income is not sufficient, from principal. Any income of the trust for a taxable year in excess of the annuity
amount shall be added to principal. If the initial net fair market value of the trust assets is incorrectly determined,
then within a reasonable period after the value is finally determined for federal estate tax purposes, the Trustee shall
pay to the Recipient and the Charitable Recipient (in thecase of an undervaluation) or receive from the Recipient
and the Charitable Recipient (in the case of an overvaluation) an amount equal to the difference between the annuity
amount(s) properly payable and theannuity amount(s) actually paid.
(b)In paragraph 2, Deferral Provision, and paragraph 4, Distribution to Charity, of the sample trust, replace each reference
to “the Recipient” with a reference to “the Recipient and the Charitable Recipient.”
(c)Add the following sentence after the first and only sentence in paragraph 6, Prohibited Transactions, of the sample trust:
The Trustee shall not make any investments that jeopardize the exempt purpose of the trust for purposes of § 4944 of
the Code, as modified by § 4947(a)(2)(A) of the Code, or retain any excess business holdings for purposes of § 4943
of the Code, as modified by § 4947(a)(2)(A) of the Code.
.03 Apportionment of the Annuity Amount among Members of a Named Class in the Discretion of the
Trustee.
(1)Explanation. A trust is not a CRAT if any person has the power to alter the amount to be paid to any named person other
than an organization described in § 170(c) if the power would cause any person to be treated as the owner of the trust, or
any portion thereof, if subpart E were applicable to the trust. Section 1.664–2(a)(3)(ii). See Rev. Rul. 77–73, 1977–1 C.B.
175. A trustee’s discretionary power, exercisable solely by that trustee, to allocate the annuity amount among the members
of a class would cause the trustee to be treated as the owner of all or a portion of the trust under § 678(a) if the trustee is a
member of the class, if the trustee may apply trust income or corpus to satisfy the trustee’s own legal obligation, or if the
trustee actually exercises the power to satisfy a support obligation owed by the trustee. Therefore, if any trustee is given the
discretionary power exercisable solely by that trustee to allocate the annuity amount among members of a class, the trust
instrument must provide that such trustee must be: (i) not a member of the recipient class; and (ii) prohibited from applying
any part of the annuity payment in satisfaction of the trustee’s own legal obligation.
(2)Instructions for use.
(a)Add the following sentence to the sample trust:
Any trustee who is authorized in the trustee’s sole discretion to allocate the annuity amount among members of a
Recipient class must not be a member of the Recipient class.
(b)Replace the first sentence of paragraph 1, Payment of Annuity Amount, of the sample trust with the following three
sentences:
In each taxable year of the trust during the annuity period, the Trustee shall pay to a member or members of a class
of persons comprised of [designated members of class] (hereinafter “the Recipient”) an annuity amount equal to [a
number no less than 5 and no more than 50] percent of the initial net fair market value of all property passing to
this trust as finally determined for federal estate tax purposes. The Trustee may pay the annuity amount to one or
more members of the class, in equal or unequal shares, as the Trustee, in the Trustee’s sole discretion, may from
time to time deem advisable. The Trustee may not, however, apply the payment for the Trustee’s own benefit, or in
satisfaction of any support or other legal obligation of the Trustee.
.04 Qualified Contingency.
(1)Explanation. Under § 664(f), payment of the annuity amount may terminate upon the earlier of the occurrence of a qualified
contingency (as defined in § 664(f)(3)) or the expiration of the term of years. The amount of the charitable deduction,
however, will be determined without regard to a qualified contingency. See § 664(f)(2).
(2)Instruction for use. Replace the second and third sentences of paragraph 1, Payment of Annuity Amount, of the sample
trust with the following two sentences, respectively:
The annuity period is a term of [not more than 20] years, unless earlier terminated by the occurrence of [qualified
contingency]. The first day of the annuity period shall be the date of my death and the last day of the annuity period
shall be the day preceding the [ordinal number corresponding to the length of the annuity period] anniversary of that
date or, if earlier, the date on which occurs the [qualified contingency].
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.05 Power of Appointment to Designate the Charitable Remainderman.
(1)Explanation. The trust instrument may grant a recipient a power of appointment to designate the charitable remainderman.
See Rev. Rul. 76–7, 1976–1 C.B. 179.
(2)Instruction for use. Replace paragraph 4, Distribution to Charity, of the sample trust with the following paragraph:
Distribution to Charity. At the termination of the annuity period, the Trustee shall distribute all of the then principal
and income of the trust (other than any amount due the Recipient under the provisions above) to one or more charita-
ble organizations described in §§ 170(c) and 2055(a) of the Code as the Recipient shall appoint and direct by specific
reference to this power of appointment by inter vivos or testamentary instrument. To the extent the Recipient fails to
effectively exercise the power of appointment, the principal and income not effectively appointed shall be distributed to
one or more organizations described in §§ 170(c) and 2055(a) of the Code as the Trustee shall select, and in the propor-
tions as the Trustee shall decide, in the Trustee’s sole discretion. If an organization fails to qualify as an organization
described in §§ 170(c) and 2055(a) of the Code at the time when any principal or income of the trust is to be distributed
to it, then the Trustee shall distribute the then principal and income to one or more organizations described in §§ 170(c)
and 2055(a) of the Code as the Trustee shall select, and in the proportions as the Trustee shall decide, in the Trustee’s
sole discretion.
DRAFTING INFORMATION
The principal authors of this revenue procedure are Karlene M. Lesho and Stephanie N. Bland of the Office of Associate Chief
Counsel (Passthroughs and Special Industries). For further information regarding this revenue procedure, contact Karlene M. Lesho
or Stephanie N. Bland at (202) 622–7830 (not a toll-free call).
26 CFR 601.201: Rulings and determination letters.
(Also Part I, §§ 170, 664, 2055; 1.644–2, 20.2055–2.)
Rev. Proc. 2003–59
SECTION 1. PURPOSE
This revenue procedure contains an annotated sample declaration of trust and alternate provisions that meet the requirements of
§ 664(d)(1) of the Internal Revenue Code for a testamentary charitable remainder annuity trust (CRAT) providing for annuity payments
payable consecutively for two measuring lives followed by the distribution of trust assets to a charitable remainderman.
SECTION 2. BACKGROUND
Previously, the Internal Revenue Service issued sample trust instruments for certain types of CRATs. The Service is updating the
previously issued samples and issuing new samples for additional types of CRATs; annotations and alternate sample provisions are
included as further guidance. In addition to the sample trust instrument included in this revenue procedure for a testamentary CRAT
providing for annuity payments payable consecutively for two measuring lives, samples are provided in separate revenue procedures
for:
(a)an inter vivos CRAT providing for annuity payments for one measuring life (see Rev. Proc. 2003–53, superceding Rev.
Proc. 89–21, 1989–1 C.B. 842);
(b)an inter vivos CRAT providing for annuity payments for a term of years (see Rev. Proc. 2003–54);
(c)an inter vivos CRAT providing for annuity payments payable consecutively for two measuring lives (see Rev. Proc.
2003–55, superceding section 4 of Rev. Proc. 90–32, 1990–1 C.B. 546);
(d)an inter vivos CRAT providing for annuity payments payable concurrently and consecutively for two measuring lives (see
Rev. Proc. 2003–56, superceding section 5 of Rev. Proc. 90–32);
(e)a testamentary CRAT providing for annuity payments for one measuring life (see Rev. Proc. 2003–57, superceding section
6 of Rev. Proc. 90–32);
(f)a testamentary CRAT providing for annuity payments for a term of years (see Rev. Proc. 2003–58); and
(g)a testamentary CRAT providing for annuity payments payable concurrently and consecutively for two measuring lives (see
Rev. Proc. 2003–60, superceding section 8 of Rev. Proc. 90–32).
SECTION 3. SCOPE AND OBJECTIVE
Section 4 of this revenue procedure provides a sample declaration of trust for a testamentary CRAT with consecutive interests
for two measuring lives that is created by an individual who is a citizen or resident of the United States. Section 5 of this revenue
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procedure provides annotations to the provisions of the sample trust. Section 6 of this revenue procedure provides samples of alternate
provisions concerning: (.01) the statement of the annuity amount as a specific dollar amount; (.02) the payment of part of the annuity
to an organization described in § 170(c); (.03) a qualified contingency; (.04) the last annuity payments to the recipients; and (.05) a
power of appointment to designate the charitable remainderman.
For transfers to a qualifying CRAT, as defined in § 664(d)(1), the remainder interest will be deductible by the estate of a citizen or
resident of the United States under § 2055(e)(2)(A) if the other requirements of § 2055(e)(2)(A) (that is, the requirements not relating
to the provisions of the governing instrument) are also met. The Service will recognize a trust as a qualified CRAT meeting all of the
requirements of § 664(d)(1) if the trust operates in a manner consistent with the terms of the trust instrument, if the trust is a valid trust
under applicable local law, and if the trust instrument: (i) is substantially similar to the sample in section 4 of this revenue procedure;
or (ii) properly integrates one or more alternate provisions from section 6 of this revenue procedure into a document substantially
similar to the sample in section 4 of this revenue procedure. A trust instrument that contains substantive provisions in addition to those
provided in section 4 of this revenue procedure (other than properly integrated alternate provisions from section 6 of this revenue
procedure, or provisions necessary to establish a valid trust underapplicable local law that are not inconsistent with the applicable
federal tax requirements), or that omits any of the provisions of section 4 of this revenue procedure (unless an alternate provision
from section 6 of this revenue procedure is properly integrated), will not necessarily be disqualified, but neither will that trust be
assured of qualification under the provisions of this revenue procedure. The Service generally will not issue a letter ruling on whether
a testamentary trust created by an individual and with consecutive interests for two measuring lives qualifies as a CRAT. The Service,
however, generally will issue letter rulings on the effect of substantive trust provisions, other than those contained in sections 4 and 6
of this revenue procedure, on the qualification of a trust as a CRAT.
SECTION 4. SAMPLE TESTAMENTARY CHARITABLE REMAINDER ANNUITY TRUST — TWO
LIVES, CONSECUTIVE INTERESTS
I give, devise, and bequeath [property bequeathed] to my Trustee in trust to be administered under this provision. I intend this
bequest to establish a charitable remainder annuity trust, within the meaning of Rev. Proc. 2003–59 and § 664(d)(1) of the Internal
Revenue Code (hereinafter “the Code”). The trust shall be known as the
Charitable Remainder Annuity
Trust and I hereby designate
as the initial trustee (hereinafter “the Trustee”).
1.Payment of Annuity Amount. In each taxable year of the trust during the annuity period, the Trustee shall pay to [permissible
recipient] (hereinafter “the Initial Recipient”) until the Initial Recipient’s death, and thereafter to [permissible recipient](hereinafter
“the Successor Recipient”) (subject to any proration in paragraph 3), an annuity amount equal to [a number no less than 5 and no
more than 50] percent of the initial net fair market value of all property passing to this trust as finally determined for federal estate
tax purposes. The first day of the annuity period shall be the date of my death and the last day of the annuity period shall be the date
of the death of the survivor of the Initial Recipient and the Successor Recipient. The annuity amount shall be paid in equal quarterly
installments at the end of each calendar quarter from income, and tothe extent income is not sufficient, from principal. Any income
of the trust for a taxable year in excess of the annuity amount shall be added to principal. If the initial net fair market value of the trust
assets is incorrectly determined, then within a reasonable period after the value is finally determined for federal estate tax purposes,
the Trustee shall pay to the Initial Recipient and/or Successor Recipient (in the case of an undervaluation) or receive from the Initial
Recipient and/or Successor Recipient (in the case of an overvaluation)an amount equal to the difference between the annuity amount(s)
properly payable and the annuity amount(s) actually paid.
2.Deferral Provision. The obligation to pay the annuity amount shall commence with the date of my death, but payment of the
annuity amount may be deferred from this date until the end of the taxable year in which the trust is completely funded. Within a
reasonable time after the end of the taxable year in which the trust is completely funded, the Trustee must pay to the Initial Recipient
and/or the Successor Recipient (in the case of an underpayment) or receive from the Initial Recipient and/or the Successor Recipient
(in the case of an overpayment) the difference between any annuity amounts actually paid, plus interest, and the annuity amounts
payable, plus interest. The interest shall be computed for any period at the rate of interest, compounded annually, that the federal
income tax regulations under § 664 of the Code prescribe for this computation.
3.Proration of Annuity Amount. The Trustee shall prorate the annuity amount on a daily basis for any short taxable year. If the
Successor Recipient survives the Initial Recipient, the Trustee shall prorate on a daily basis the next regular annuity payment due after
the death of the Initial Recipient between the estate of the Initial Recipient and the Successor Recipient. In the taxable year of the
trust during which the annuity period ends, the Trustee shall prorate the annuity amount on a daily basis for the number of days of the
annuity period in that taxable year.
4.Distribution to Charity. At the termination of the annuity period, the Trustee shall distribute all of the then principal and income
of the trust (other than any amount due the Recipients or their estates under the provisions above) to [designated remainderman]
(hereinafter “the Charitable Organization”). If the Charitable Organization is not an organization described in §§ 170(c) and 2055(a)
of the Code at the time when any principal or income of the trust is to be distributed to it, then the Trustee shall distribute the then
principal and income to one or more organizations described in §§ 170(c) and 2055(a) of the Code as the Trustee shall select, and in
the proportions as the Trustee shall decide, in the Trustee’s sole discretion.
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5.Additional Contributions. No additional contributions shall be made to the trust after the initial contribution. The initial contri-
bution, however, shall be deemed to consist of all property passing to the trust by reason of my death.
6.Prohibited Transactions. The Trustee shall not engage in any act of self-dealing within the meaning of § 4941(d) of the Code, as
modified by § 4947(a)(2)(A) of the Code, and shall not make any taxable expenditures within the meaning of § 4945(d) of the Code,
as modified by § 4947(a)(2)(A) of the Code.
7.Taxable Year. The taxable year of the trust shall be the calendar year.
8.Governing Law. The operation of the trust shall be governed by the laws of the State of
.How-
ever, the Trustee is prohibited from exercising any power or discretion granted under said laws that would be inconsistent with the
qualification of the trust as a charitable remainder annuity trust under § 664(d)(1) of the Code and the corresponding regulations.
9.Limited Power of Amendment. This trust is irrevocable. However, the Trustee shall have the power, acting alone, to amend the
trust from time to time in any manner required for the sole purpose of ensuring that the trust qualifies and continues to qualify as a
charitable remainder annuity trust within the meaning of § 664(d)(1) of the Code.
10.Investment of Trust Assets. Nothing in this trust instrument shall be construed to restrict the Trustee from investing the trust
assets in a manner that could result in the annual realization of a reasonable amount of income or gain from the sale or disposition of
trust assets.
SECTION 5. ANNOTATIONS REGARDING SAMPLE TESTAMENTARY CHARITABLE
REMAINDER ANNUITY TRUST — TWO LIVES, CONSECUTIVE INTERESTS
.01 Annotations for Introductory Paragraph of the Sample Trust.
(1)Factors concerning qualification of trust. A deduction must be allowable under § 2055 for property contributed to the trust.
Section 1.664–1(a)(1)(iii)(a) of the Income Tax Regulations. The trust must meet the definition of and function exclusively
as a charitable remainder trust from the creation of the trust. Section 1.664–1(a)(4). Solely for purposes of § 664, a trust is
deemed created at the earliest time that no person is treated as the owner of the entire trust under subpart E, part 1, subchapter
J, chapter 1, subtitle A of the Code (subpart E). Section 1.664–1(a)(4). For purposes of § 2055, a charitable remainder trust
shall be deemed created at the date of death of the decedent (even though the trust is not funded until the end of a reasonable
period of administration or settlement) if the obligation to pay the annuity amount with respect to the property passing in
trust at the death of the decedent begins as of the date of death of the decedent, even though the requirement to pay this
amount is deferred in accordance with § 1.664–1(a)(5)(i). Section 1.664–1(a)(5)(i). In addition, funding the trust with
certain types of assets may disqualify it as a charitable remainder trust. See § 1.664–1(a)(7) and Rev. Rul. 73–610, 1973–2
C.B. 213.
(2)Valuation of unmarketable assets. If the trust is funded with unmarketable assets, the initial net fair market value of the
assets must be determined exclusively by an independent trustee, as defined in § 1.664–1(a)(7)(iii), or must be determined
by a current “qualified appraisal” from a “qualified appraiser,” as defined in § 1.170A–13(c)(3) and (c)(5), respectively.
Section 1.664–1(a)(7).
(3)Trustee provisions. Alternate or successor trustees may be designated in the trust instrument. In addition, the trust instru-
ment may contain other administrative provisions relating to the trustee’s duties and powers, as long as the provisions do
not conflict with the rules governing charitable remainder trusts under § 664 and the regulations thereunder.
.02 Annotations for Paragraph 1, Payment of Annuity Amount, of the Sample Trust.
(1)Permissible recipients. For a CRAT with an annuity period based on the lives of two individuals, the annuity amount must
generally be paid to those individuals and both must be living at the time of the creation of the trust. See Rev. Rul. 2002–20,
2002–1 C.B. 794, for situations in which the annuity amount may be paid to a trust for the benefit of an individual who is
financially disabled. An organization described in § 170(c) may receive part, but not all, of the annuity amount. Section
664(d)(1)(A) and § 1.664–2(a)(3)(i). See section 6.02 of this revenue procedure for an alternate provision that provides for
payment of part of the annuity to an organization described in § 170(c).
(2)Percentage requirements. The sum certain annuity amount must be at least 5 percent and not more than 50 percent of the
initial net fair market value of the assets placed in trust. Section 664(d)(1)(A). Even if the sum certain annuity amount is at
least 5 percent and not more than 50 percent of the initial net fair market value of the assets placed in trust, no deduction
will be allowable under § 2055 if the probability that the trust corpus will be exhausted before the death of the survivor
of the recipients exceeds 5 percent. Rev. Rul. 77–374, 1977–2 C.B. 329. See § 20.7520–3(b) for special rules that may
be applicable in valuing interests transferred to CRATs. In addition, the value (determined under § 7520) of the charitable
remainder interest must be at least 10 percent of the initial net fair market value of all property placed in the trust. Section
664(d)(1)(D).
(3)Payment of annuity amount in installments. Paragraph 1, Payment of Annuity Amount, of the sample trust specifies that
the annuity amount is to be paid in equal quarterly installments at the end of each quarter. However, the trust instrument
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may specify that the annuity amount is to be paid to the recipient annually or in equal or unequal installments throughout
the year. See § 1.664–2(a)(1)(i). The amount of the charitable deduction will be affected by the frequency of payment, by
whether the installments are equal or unequal, and by whether each installment is payable at the beginning or end of the
period. See § 1.664–2(c) and § 20.2031–7(d)(2)(iv).
(4)Payment of annuity amount by close of taxable year. Generally, the annuity amount for any taxable year must be paid before
the close of the taxable year for which it is due. For circumstances under which the annuity amount may be paid within
a reasonable time after the close of the taxable year, see § 1.664–2(a)(1)(i)(a). In addition, § 1.664–1(a)(5)(i) provides a
special rule applicable to charitable remainder trusts created bytestamentary transfer that may defer the requirement to pay
the annuity amount until the end of the taxable year in which the trust is completely funded. See section 5.03(1) of this
revenue procedure for additional information regarding the deferral of the payment of the annuity amount until the end of
the taxable year in which thetrust is completely funded.
(5)Early distributions to charity. The trust instrument may provide that an amount other than the annuity shall be paid (or
may be paid in the discretion of the trustee) to an organization described in § 170(c). If such a distribution is made in kind,
the adjusted basis of the property distributed must be fairly representative of the adjusted basis of the property available for
distribution on the date of distribution. Section 1.664–2(a)(4).
.03 Annotations for Paragraph 2, Deferral Provision, of the Sample Trust.
(1)Deferral of requirement to pay annuity amount. The deferral provision in paragraph 2 of the sample trust authorizes defer-
ring the payment of the annuity amount until the end of the taxable year of the trust in which the trust is completely funded.
Section 1.664–1(a)(5)(i) provides the operational rule for deferring payment of the annuity amount in this circumstance.
(2)Treatment of distributions. For the proper treatment of distributions to a charitable remainder trust or to the recipient
during the period of administration of an estate or settlement of a trust that is not a charitable remainder trust, see
§ 1.664–1(a)(5)(iii).
.04 Annotations for Paragraph 3, Proration of Annuity Amount, of the Sample Trust.
(1)Prorating annuity amount. To compute the annuity amount in a short taxable year and in the taxable year in which the
annuity period terminates, see § 1.664–2(a)(1)(iv)(a)and(b), respectively.
(2)Determining annuity amount payable in year of a recipient’s death. Paragraph 3, Proration of Annuity Amount, of the
sample trust specifies that the annuity amount shall be prorated on a daily basis. See section 6.04 of this revenue procedure
for alternate provisions that provide for termination of the annuity amount with the last regular payment preceding the death
of each recipient.
.05 Annotations for Paragraph 4, Distribution to Charity, of the Sample Trust.
(1)Minimum value of remainder. As noted in section 5.02(2) of this revenue procedure, the value (determined under § 7520)
of the charitable remainder interest is required to be at least 10 percent of the initial net fair market value of all property
placed in the trust. Section 664(d)(1)(D).
(2)Designated remainderman. Any named charitable remainderman must be an organization described in §§ 170(c) and
2055(a) at the time of the transfer to the charitable remainder annuity trust. See § 664(d)(1)(C) and Rev. Rul. 77–385,
1977–2 C.B. 331. The trust instrument may restrict the charitable remainderman to an organization described in §§ 170(c)
and 2055(a), but grant to a trustee or other person the power to designate the actual charitable remainderman. See section
6.05 of this revenue procedure for an alternate provision in which a recipient is granted a power of appointment to designate
the charitable remainderman.
(3)Multiple remaindermen. The remainder interest may pass to more than one charitable organization as long as each organi-
zation is described in §§ 170(c) and 2055(a). Section 1.664–2(a)(6)(i).
(4)Alternative remaindermen. The trust instrument of a CRAT must provide a means for selecting alternative charitable re-
maindermen in the event the designated organization is not qualified at the time any payments are to be made to it from the
trust. Section 1.664–2(a)(6)(iv).
.06 Annotations for Paragraph 6, Prohibited Transactions, of the Sample Trust.
(1)Payment of the annuity amount. Payment of the annuity amount to the recipients is not considered an act of self-dealing
within the meaning of § 4941(d), as modified by § 4947(a)(2)(A), or a taxable expenditure within the meaning of § 4945(d),
as modified by § 4947(a)(2)(A). Section 53.4947–1(c)(2) of the Foundation and Similar Excise Taxes Regulations.
(2)Prohibitions against certain investments and excess business holdings. Prohibitions against investments that jeopardize
the exempt purpose of the trust for purposes of § 4944, as modified by § 4947(a)(2)(A), and against retaining any excess
business holdings for purposes of § 4943, as modified by § 4947(a)(2)(A), are required if the trust provides for payment of
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part of an annuity amount to an organization described in § 170(c) and an estate tax charitable deduction is sought for this
interest. See § 4947(b)(3). See section 6.02 of this revenue procedure for an alternate provision that provides for payment
ofpartoftheannuitytoanorganizationdescribedin§170(c).
(3)Trust to continue in existence for benefit of charity. The governing instrument requirements of § 508(e) must be included
in the trust instrument if, after the termination of the annuity period: (i) the trust instrument provides that the trust shall
continue in existence for the benefit of the charitable remainderman and, as a result, the trust will become subject to the
provisions of § 4947(a)(1); and (ii) the trust will be treated as a private foundation within the meaning of § 509(a), as mod-
ified by § 4947(a)(1). Except as provided in paragraph 6 of the sample trust, the trust instrument may limit the application
of the provisions of § 508(e) to the period after the termination of the annuity period when the trust continues in existence
for the benefit of the charitable remainderman.
SECTION 6. ALTERNATE PROVISIONS FOR SAMPLE TESTAMENTARY CHARITABLE
REMAINDER ANNUITY TRUST — TWO LIVES, CONSECUTIVE INTERESTS
.01 Annuity Amount Stated as a Specific Dollar Amount.
(1)Explanation. As an alternative to stating the annuity amount as a fraction or percentage of the initial net fair market value
of the assets transferred to the trust, the annuity amount may be stated as a specific dollar amount. Section 1.664–2(a)(1)(ii)
and (iii). In either case, the annuity amount must be not less than 5 percent nor more than 50 percent of the initial net fair
market value of all property placed in trust. Section 664(d)(1)(A).
(2)Instructions for use.
(a)Replace the first sentence of paragraph 1, Payment of Annuity Amount, of the sample trust with the following sentence:
In each taxable year of the trust during the annuity period, the Trustee shall pay to [permissible recipient](here-
inafter “the Initial Recipient”) until the Initial Recipient’s death and thereafter to [permissible recipient](hereinafter
“the Successor Recipient”) (subject to any proration in paragraph 3), an annuity amount equal to [the stated dollar
amount].
(b)Delete the last sentence of paragraph 1, Payment of Annuity Amount, of the sample trust concerning the incorrect valu-
ation of trust assets.
.02 Payment of Part of the Annuity to an Organization Described in § 170(c).
(1)Explanation. An organization described in § 170(c) may receive part, but not all, of any annuity amount. Section
664(d)(1)(A). If an estate tax charitable deduction is sought for the present value of the annuity interest passing to a
charitable organization, the trust instrument must contain additional provisions. First, the trust instrument must specify the
portion of each annuity payment that is payable to the noncharitable recipient and to the charitable organization described
in §§ 170(c) and 2055(a). Second, the trust instrument must contain a means for selecting an alternative qualified
charitable organization if the designated organization is not a qualified organization at the time when any annuity amount
is to be paid to it. Third, the trust instrument must contain prohibitions against investments that jeopardize the exempt
purpose of the trust for purposes of § 4944, as modified by § 4947(a)(2)(A), and against retaining any excess business
holdings for purposes of § 4943, as modified by § 4947(a)(2)(A).
(2)Instructions for use.
(a)Replace paragraph 1, Payment of Annuity Amount, of the sample trust with the following paragraph:
Payment of Annuity Amount. The annuity amount is equal to [a number no less than 5 and no more than 50] percent
of the initial net fair market value of all property passing to this trust as finally determined for federal estate tax pur-
poses. In each taxable year of the trust during the annuity period, the Trustee shall pay [the percentage of the annuity
amount payable to the noncharitable recipients] percent of the annuity amount to [permissible recipient](hereinafter
“the Initial Recipient”) until the Initial Recipient’s death, and thereafter to [permissible recipient] (hereinafter “the
Successor Recipient”) (subject to any proration in paragraph 3). In each taxable year of the trust during the annuity
period, the Trustee shall pay [the percentage of the annuity amount payable to the charitable recipient] percent of
the annuity amount to [an organization described in §§ 170(c) and 2055(a) of the Code] (hereinafter “the Charitable
Recipient”). The first day of the annuity period shall be the date of my death and the last day of the annuity period
shall be the date of the death of the survivor of the Initial Recipient and the Successor Recipient. If the Charitable
Recipient is not an organization described in §§ 170(c) and 2055(a) of the Code at the time when any annuity payment
is to be distributed to it, then the Trustee shall distribute that annuity payment to one or more organizations described
in §§ 170(c) and 2055(a) of the Code as the Trustee shall select, and in the proportions as the Trustee shall decide,
in the Trustee’s sole discretion. The annuity amount shall be paid in equal quarterly installments at the end of each
calendar quarter from income, and to the extent income is not sufficient, from principal. Any income of the trust for
a taxable year in excess of the annuity amount shall be addedto principal. If the initial net fair market value of the
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trust assets is incorrectly determined, then within a reasonable period after the value is finally determined for federal
estate tax purposes, the Trustee shall pay to the Initial Recipient and/or the Successor Recipient and the Charitable
Recipient (in the case of an undervaluation) or receive from the Initial Recipient and/or the Successor Recipient and
the Charitable Recipient (in the case of an overvaluation) an amount equal to the difference between the annuity
amount(s) properly payable and theannuity amount(s) actually paid.
(b)In paragraph 2, Deferral Provision, of the sample trust, replace each reference to “the Initial Recipient and/or the Succes-
sor Recipient” with a reference to “the Initial Recipient and/or the Successor Recipient and the Charitable Recipient.”
(c)Replace the first parenthetical in paragraph 4, Distribution to Charity, of the sample trust with the following parenthetical:
(other than any amount due the Initial Recipient, the Successor Recipient, or their estates and the Charitable Recipient
under the provisions above).
(d)Add the following sentence after the first and only sentence in paragraph 6, Prohibited Transactions, of the sample trust:
The Trustee shall not make any investments that jeopardize the exempt purpose of the trust for purposes of § 4944 of
the Code, as modified by § 4947(a)(2)(A) of the Code, or retain any excess business holdings for purposes of § 4943
of the Code, as modified by § 4947(a)(2)(A) of the Code.
.03 Qualified Contingency.
(1)Explanation. Under § 664(f), payment of the annuity amount may terminate upon the earlier of the occurrence of a qualified
contingency (as defined in § 664(f)(3)) or the death of the survivor of the initial recipient and the successor recipient. The
amount of the charitable deduction, however, will be determined without regard to a qualified contingency. See § 664(f)(2).
(2)Instructions for use.Replace the second sentence of paragraph 1, Payment of Annuity Amount, of the sample trust with
the following sentence:
The first day of the annuity period shall be the date of my death and the last day of the annuity period shall be the date
of the death of the survivor of the Initial Recipient and the Successor Recipient or, if earlier, the date on which occurs
the [qualified contingency].
.04 Last Annuity Payments to the Recipients.
(1)Explanation. As an alternative to prorating the annuity amount in the taxable year of the initial recipient’s death, payment
of the initial recipient’s share of the annuity amount may terminate with the last regular payment preceding the initial
recipient’s death. Similarly, as an alternative to prorating the annuity amount in the taxable year of the termination of the
annuity period, payment of the annuity amount may terminate with the last regular payment preceding the termination of
the annuity period. However, the fact that a recipient may not receive the last payment shall not be taken into account for
purposes of determining the present value of the remainder interest. Section 1.664–2(a)(5)(i).
(2)Instruction for use.
(a)To add an alternate provision to terminate the payment of the initial recipient’s share of the annuity amount with the last
regular payment preceding his or her death, replace paragraph 3, Proration of Annuity Amount, of the sample trust with
the following paragraph:
Proration of Annuity Amount. Except as provided below, the Trustee shall prorate the annuity amount on a daily
basis for any short taxable year. The obligation of the Trustee to pay the annuity amount to the Initial Recipient shall
terminate with the regular quarterly installment next preceding the Initial Recipient’s death. In the taxable year of
the trust during which the annuity period ends, the Trustee shall prorate the annuity amount on a daily basis for the
number of days of the annuity period in that taxable year.
(b)To add an alternate provision to terminate the payment of the annuity amount with the last regular payment preceding
the termination of the annuity period, replace paragraph 3, Proration of Annuity Amount, of the sample trust with the
following paragraph:
Proration of Annuity Amount. Except as provided below, the Trustee shall prorate the annuity amount on a daily
basis for any short taxable year. If the Successor Recipient survives the Initial Recipient, the Trustee shall prorate on
a daily basis the next regular annuity payment due after the death of the Initial Recipient between the estate of the
Initial Recipient and the Successor Recipient. In the taxable year of the trust during which the annuity period ends,
the obligation of the Trustee to pay the annuity amount shall terminate with the regular quarterly installment next
preceding the termination of the annuity period.
(c)To add an alternate provision terminating the payment of the initial recipient’s share of the annuity amount with the last
regular payment preceding his or her death, and terminating the payment of the annuity amount with the last regular
payment preceding the termination of the annuity period,replace paragraph 3, Proration of Annuity Amount, of the
sample trust with the following paragraph:
Proration of Annuity Amount. Except as provided below, the Trustee shall prorate the annuity amount on a daily
basis for any short taxable year. The obligation of the Trustee to pay the annuity amount to the Initial Recipient shall
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terminate with the regular quarterly installment next preceding the Initial Recipient’s death. In the taxable year of the
trust during which the annuity period ends, the obligation of the Trustee to pay the annuity amount shall terminate
with the regular quarterly installment next preceding the termination of the annuity period.
.05 Power of Appointment to Designate the Charitable Remainderman.
(1)Explanation. The trust instrument may grant a recipient a power of appointment to designate the charitable remainderman.
See Rev. Rul. 76–7, 1976–1 C.B. 179.
(2)Instruction for use. Replace paragraph 4, Distribution to Charity, of the sample trust with the following paragraph:
Distribution to Charity. At the termination of the annuity period, the Trustee shall distribute all of the then principal and
income of the trust (other than any amount due the Recipients or their estates under the provisions above) to one or more
charitable organizations described in §§ 170(c) and 2055(a) of the Code as [one of the named permissible recipients]
shall appoint and direct by specific reference to this power of appointment by inter vivos or testamentary instrument. To
the extent this power of appointment is not effectively exercised, the principal and income not effectively appointed shall
be distributed to one or more organizations described in §§ 170(c) and 2055(a) of the Code as the Trustee shall select,
and in the proportions as the Trustee shall decide, in the Trustee’s sole discretion. If an organization fails to qualify as
an organization described in §§ 170(c) and 2055(a) of the Code at the time when any principal or income of the trust
is to be distributed to it, then the Trustee shall distribute the then principal and income to one or more organizations
described in §§ 170(c) and 2055(a) of the Code as the Trusteeshall select, and in the proportions as the Trustee shall
decide, in the Trustee’s sole discretion.
SECTION 7. EFFECT ON OTHER REVENUE PROCEDURES
Section 7 of Rev. Proc. 90–32 is superseded.
DRAFTING INFORMATION
The principal authors of this revenue procedure are Karlene M. Lesho and Stephanie N. Bland of the Office of Associate Chief
Counsel (Passthroughs and Special Industries). For further information regarding this revenue procedure, contact Karlene M. Lesho
or Stephanie N. Bland at (202) 622–7830 (not a toll-free call).
26 CFR 601.201: Rulings and determination letters.
(Also Part I, §§ 170, 664, 2055; 1.664–2, 20.2055–2.)
Rev. Proc. 2003–60
SECTION 1. PURPOSE
This revenue procedure contains an annotated sample declaration of trust and alternate provisions that meet the requirements of
§ 664(d)(1) of the Internal Revenue Code for a testamentary charitable remainder annuity trust (CRAT) providing for annuity payments
payable concurrently and consecutively for two measuring lives followed by the distribution of trust assets to a charitable remainder-
man.
SECTION 2. BACKGROUND
Previously, the Internal Revenue Service issued sample trust instruments for certain types of CRATs. The Service is updating the
previously issued samples and issuing new samples for additional types of CRATs; annotations and alternate sample provisions are
included as further guidance. In addition to the sample trust instrument included in this revenue procedure for a testamentary CRAT
providing for annuity payments payable concurrently and consecutively for two measuring lives, samples are provided in separate
revenue procedures for:
(a)an inter vivos CRAT providing for annuity payments for one measuring life (see Rev. Proc. 2003–53, superceding Rev.
Proc. 89–21, 1989–1 C.B. 842);
(b)an inter vivos CRAT providing for annuity payments for a term of years (see Rev. Proc. 2003–54);
(c)an inter vivos CRAT providing for annuity payments payable consecutively for two measuring lives (see Rev. Proc.
2003–55, superceding section 4 of Rev. Proc. 90–32, 1990–1 C.B. 546);
(d)an inter vivos CRAT providing for annuity payments payable concurrently and consecutively for two measuring lives (see
Rev. Proc. 2003–56, superceding section 5 of Rev. Proc. 90–32);
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(e)a testamentary CRAT providing for annuity payments for one measuring life (see Rev. Proc. 2003–57, superceding section
6 of Rev. Proc. 90–32);
(f)a testamentary CRAT providing for annuity payments for a term of years (see Rev. Proc. 2003–58); and
(g)a testamentary CRAT providing for annuity payments payable consecutively for two measuring lives (see Rev. Proc.
2003–59, superceding section 7 of Rev. Proc. 90–32).
SECTION 3. SCOPE AND OBJECTIVE
Section 4 of this revenue procedure provides a sample declaration of trust for a testamentary CRAT with concurrent and consecutive
interests for two measuring lives that is created by an individual who is a citizen or resident of the United States. Section 5 of this
revenue procedure provides annotations to the provisions of the sample trust. Section 6 of this revenue procedure provides samples
of alternate provisions concerning: (.01) the statement of the annuity amount as a specific dollar amount; (.02) the payment of part of
the annuity to an organization described in § 170(c); (.03) a qualified contingency; (.04) the last annuity payments to the recipients;
and (.05) a power of appointment to designate the charitable remainderman.
For transfers to a qualifying CRAT, as defined in § 664(d)(1), the remainder interest will be deductible by the estate of a citizen or
resident of the United States under § 2055(e)(2)(A) if the other requirements of § 2055(e)(2)(A) (that is, the requirements not relating
to the provisions of the governing instrument) are also met. The Service will recognize a trust as a qualified CRAT meeting all of the
requirements of § 664(d)(1) if the trust operates in a manner consistent with the terms of the trust instrument, if the trust is a valid trust
under applicable local law, and if the trust instrument: (i) is substantially similar to the sample in section 4 of this revenue procedure;
or (ii) properly integrates one or more alternate provisions from section 6 of this revenue procedure into a document substantially
similar to the sample in section 4 of this revenue procedure. A trust instrument that contains substantive provisions in addition to those
provided in section 4 of this revenue procedure (other than properly integrated alternate provisions from section 6 of this revenue
procedure, or provisions necessary to establish a valid trust underapplicable local law that are not inconsistent with the applicable
federal tax requirements), or that omits any of the provisions of section 4 of this revenue procedure (unless an alternate provision from
section 6 of this revenue procedure is properly integrated), will not necessarily be disqualified, but neither will that trust be assured
of qualification under the provisions of this revenue procedure. The Service generally will not issue a letter ruling on whether a
testamentary trust created by an individual and with concurrent and consecutive interests for two measuring lives qualifies as a CRAT.
The Service, however, generally will issue letter rulings on the effect of substantive trust provisions, other than those contained in
sections 4 and 6 of this revenue procedure, on the qualification of a trust as a CRAT.
SECTION 4. SAMPLE TESTAMENTARY CHARITABLE REMAINDER ANNUITY TRUST — TWO
LIVES, CONCURRENT AND CONSECUTIVE INTERESTS
I give, devise, and bequeath [property bequeathed] to my Trustee in trust to be administered under this provision. I intend this
bequest to establish a charitable remainder annuity trust, within the meaning of Rev. Proc. 2003–60 and § 664(d)(1) of the Internal
Revenue Code (hereinafter “the Code”). The trust shall be known as the
Charitable Remainder Annuity
Trust and I hereby designate
as the initial trustee (hereinafter “the Trustee”).
1.Payment of Annuity Amount. In each taxable year of the trust during the annuity period, the Trustee shall pay to [permissible
recipient]andto[permissible recipient] (hereinafter “the Recipients”) in equal shares during their lifetimes, an annuity amount equal
to [a number no less than 5 and no more than 50] percent of the initial net fair market value of all property passing to this trust as
finally determined for federal estate tax purposes, and upon the death of one (hereinafter “the Predeceasing Recipient”), the Trustee
shall pay the entire annuity amount (subject to any proration in paragraph 3) to the survivor (hereinafter “the Survivor Recipient”).
The first day of the annuity period shall be the date of my death and the last day of the annuity period shall be the date of the Survivor
Recipient’s death. The annuity amount shall be paid in equal quarterly installments at the end of each calendar quarter from income,
and to the extent income is not sufficient, from principal. Any income of the trust for a taxable year in excess of the annuity amount
shall be added to principal. If the initial net fair market value of the trust assets is incorrectly determined, then within a reasonable
period after the value is finally determined for federal estate tax purposes, the Trustee shall pay to the Recipients (in the case of an
undervaluation) or receive from the Recipients (in the case of an overvaluation) an amount equal to the difference between the annuity
amount(s) properly payable and the annuity amount(s) actually paid.
2.Deferral Provision. The obligation to pay the annuity amount shall commence with the date of my death, but payment of the
annuity amount may be deferred from this date until the end of the taxable year in which the trust is completely funded. Within a
reasonable time after the end of the taxable year in which the trust is completely funded, the Trustee must pay to the Recipients (in the
case of an underpayment) or receive from the Recipients (in the case of an overpayment) the difference between any annuity amounts
actually paid, plus interest, and the annuity amounts payable, plus interest. The interest shall be computed for any period at the rate
of interest, compounded annually, that the federal income tax regulations under § 664 of the Code prescribe for this computation.
3.Proration of Annuity Amount. The Trustee shall prorate the annuity amount on a daily basis for any short taxable year. Upon the
death of the Predeceasing Recipient, the Trustee shall prorate on a daily basis the Predeceasing Recipient’s share of the next regular
annuity payment between the estate of the Predeceasing Recipient andthe Survivor Recipient. In the taxable year of the trust during
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which the annuity period ends, the Trustee shall prorate the annuity amount on a daily basis for the number of days of the annuity
period in that taxable year.
4.Distribution to Charity. At the termination of the annuity period, the Trustee shall distribute all of the then principal and income
of the trust (other than any amount due the Recipients or their estates under the provisions above) to [designated remainderman]
(hereinafter “the Charitable Organization”). If the Charitable Organization is not an organization described in §§ 170(c) and 2055(a)
of the Code at the time when any principal or income of the trust is to be distributed to it, then the Trustee shall distribute the then
principal and income to one or more organizations described in §§ 170(c) and 2055(a) of the Code as the Trustee shall select, and in
the proportions as the Trustee shall decide, in the Trustee’s sole discretion.
5.Additional Contributions. No additional contributions shall be made to the trust after the initial contribution. The initial contri-
bution, however, shall be deemed to consist of all property passing to the trust by reason of my death.
6.Prohibited Transactions. The Trustee shall not engage in any act of self-dealing within the meaning of § 4941(d) of the Code, as
modified by § 4947(a)(2)(A) of the Code, and shall not make any taxable expenditures within the meaning of § 4945(d) of the Code,
as modified by § 4947(a)(2)(A) of the Code.
7.Taxable Year. The taxable year of the trust shall be the calendar year.
8.Governing Law. The operation of the trust shall be governed by the laws of the State of
.How-
ever, the Trustee is prohibited from exercising any power or discretion granted under said laws that would be inconsistent with the
qualification of the trust as a charitable remainder annuity trust under § 664(d)(1) of the Code and the corresponding regulations.
9.Limited Power of Amendment. This trust is irrevocable. However, the Trustee shall have the power, acting alone, to amend the
trust from time to time in any manner required for the sole purpose of ensuring that the trust qualifies and continues to qualify as a
charitable remainder annuity trust within the meaning of § 664(d)(1) of the Code.
10.Investment of Trust Assets. Nothing in this trust instrument shall be construed to restrict the Trustee from investing the trust
assets in a manner that could result in the annual realization of a reasonable amount of income or gain from the sale or disposition of
trust assets.
SECTION 5. ANNOTATIONS REGARDING SAMPLE TESTAMENTARY CHARITABLE
REMAINDER ANNUITY TRUST — TWO LIVES, CONCURRENT AND CONSECUTIVE
INTERESTS
.01 Annotations for Introductory Paragraph of the Sample Trust.
(1)Factors concerning qualification of trust. A deduction must be allowable under § 2055 for property contributed to the trust.
Section 1.664–1(a)(1)(iii)(a) of the Income Tax Regulations. The trust must meet the definition of and function exclusively
as a charitable remainder trust from the creation of the trust. Section 1.664–1(a)(4). Solely for purposes of § 664, a trust is
deemed created at the earliest time that no person is treated as the owner of the entire trust under subpart E, part 1, subchapter
J, chapter 1, subtitle A of the Code (subpart E). Section 1.664–1(a)(4). For purposes of § 2055, a charitable remainder trust
shall be deemed created at the date of death of the decedent (even though the trust is not funded until the end of a reasonable
period of administration or settlement) if the obligation to pay the annuity amount with respect to the property passing in
trust at the death of the decedent begins as of the date of death of the decedent, even though the requirement to pay this
amount is deferred in accordance with § 1.664–1(a)(5)(i). Section 1.664–1(a)(5)(i). In addition, funding the trust with
certain types of assets may disqualify it as a charitable remainder trust. See § 1.664–1(a)(7) and Rev. Rul. 73–610, 1973–2
C.B. 213.
(2)Valuation of unmarketable assets. If the trust is funded with unmarketable assets, the initial net fair market value of the
assets must be determined exclusively by an independent trustee, as defined in § 1.664–1(a)(7)(iii), or must be determined
by a current “qualified appraisal” from a “qualified appraiser,” as defined in § 1.170A–13(c)(3) and (c)(5), respectively.
Section 1.664–1(a)(7).
(3)Trustee provisions. Alternate or successor trustees may be designated in the trust instrument. In addition, the trust instru-
ment may contain other administrative provisions relating to the trustee’s duties and powers, as long as the provisions do
not conflict with the rules governing charitable remainder trusts under § 664 and the regulations thereunder.
.02 Annotations for Paragraph 1, Payment of Annuity Amount, of the Sample Trust.
(1)Permissible recipients. For a CRAT having an annuity period based on the lives of two individuals, the annuity amount must
generally be paid to those individuals, and both must be living at the time of the creation of the trust. See Rev. Rul. 2002–20,
2002–1 C.B. 794, for situations in which the annuity amount may be paid to a trust for the benefit of an individual who is
financially disabled. An organization described in § 170(c) may receive part, but not all, of the annuity amount. Section
664(d)(1)(A) and § 1.664–2(a)(3)(i). See section 6.02 of this revenue procedure for an alternate provision that provides for
payment of part of the annuity to an organization described in § 170(c).
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(2)Division of annuity amount between recipients. The sample trust provides that while both recipients are alive they will share
the annuity amount equally and upon the death of the predeceasing recipient the survivor recipient will receive all of the
annuity amount, subject to any proration in paragraph 3. The annuity amount may be divided other than equally during the
joint lives of the recipients. In addition, the share of the predeceasing recipient may be made payable to an organization
described in § 170(c) for the rest of the survivor recipient's life.
(3)Percentage requirements. The sum certain annuity amount must be at least 5 percent and not more than 50 percent of the
initial net fair market value of the assets placed in trust. Section 664(d)(1)(A). Even if the sum certain annuity amount is at
least 5 percent and not more than 50 percent of the initial net fair market value of the assets placed in trust, no deduction
will be allowable under § 2055 if the probability that the trust corpus will be exhausted before the death of the survivor
of the recipients exceeds 5 percent. Rev. Rul. 77–374, 1977–2 C.B. 329. See § 20.7520–3(b) for special rules that may
be applicable in valuing interests transferred to CRATs. In addition, the value (determined under § 7520) of the charitable
remainder interest must be at least 10 percent of the initial net fair market value of all property placed in the trust. Section
664(d)(1)(D).
(4)Payment of annuity amount in installments. Paragraph 1, Payment of Annuity Amount, of the sample trust specifies that
the annuity amount is to be paid in equal quarterly installments at the end of each quarter. However, the trust instrument
may specify that the annuity amount is to be paid to the recipients annually or in equal or unequal installments throughout
the year. See § 1.664–2(a)(1)(i). The amount of the charitable deduction will be affected by the frequency of payment, by
whether the installments are equal or unequal, and by whether each installment is payable at the beginning or end of the
period. See § 1.664–2(c) and § 20.2031–7(d)(2)(iv)
(5)Payment of annuity amount by close of taxable year. Generally, the annuity amount for any taxable year must be paid before
the close of the taxable year for which it is due. For circumstances under which the annuity amount may be paid within
a reasonable time after the close of the taxable year, see § 1.664–2(a)(1)(i)(a). In addition, § 1.664–1(a)(5)(i) provides a
special rule applicable to charitable remainder trusts created bytestamentary transfer that may defer the requirement to pay
the annuity amount until the end of the taxable year in which the trust is completely funded. See section 5.03(1) of this
revenue procedure for additional information regarding the deferral of the payment of the annuity amount until the end of
the taxable year in which thetrust is completely funded.
(6)Early distributions to charity. The trust instrument may provide that an amount other than the annuity shall be paid (or
may be paid in the discretion of the trustee) to an organization described in § 170(c). If such a distribution is made in kind,
the adjusted basis of the property distributed must be fairly representative of the adjusted basis of the property available for
distribution on the date of distribution. Section 1.664–2(a)(4).
.03 Annotations for Paragraph 2, Deferral Provision, of the Sample Trust.
(1)Deferral of requirement to pay annuity amount. The deferral provision in paragraph 2 of the sample trust authorizes defer-
ring the payment of the annuity amount until the end of the taxable year of the trust in which the trust is completely funded.
Section 1.664–1(a)(5)(i) provides the operational rule for deferring payment of the annuity amount in this circumstance.
(2)Treatment of distributions. For the proper treatment of distributions to a charitable remainder trust or to the recipients
during the period of administration of an estate or settlement of a trust that is not a charitable remainder trust, see
§ 1.664–1(a)(5)(iii).
.04 Annotations for Paragraph 3, Proration of Annuity Amount, of the Sample Trust.
(1)Prorating annuity amount. To compute the annuity amount in a short taxable year and in the taxable year in which the
annuity period terminates, see § 1.664–2(a)(1)(iv)(a)and(b), respectively.
(2)Determining annuity amount payable in year of a recipient’s death. Paragraph 3, Proration of Annuity Amount, of the
sample trust specifies that the annuity amount shall be prorated on a daily basis. See section 6.04 of this revenue procedure
for alternate provisions that provide for termination of the annuity amount with the last regular payment preceding the death
of each recipient.
.05 Annotations for Paragraph 4, Distribution to Charity, of the Sample Trust.
(1)Minimum value of remainder. As noted in section 5.02(3) of this revenue procedure, the value (determined under § 7520)
of the charitable remainder interest is required to be at least 10 percent of the initial net fair market value of all property
placed in the trust. Section 664(d)(1)(D).
(2)Designated remainderman. Any named charitable remainderman must be an organization described in §§ 170(c) and
2055(a) at the time of the transfer to the charitable remainder annuity trust. See § 664(d)(1)(C) and Rev. Rul. 77–385,
1977–2 C.B. 331. The trust instrument may restrict the charitable remainderman to an organization described in §§ 170(c)
and 2055(a), but grant to a trustee or other person the power to designate the actual charitable remainderman. See section
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6.05 of this revenue procedure for an alternate provision in which a recipient is granted a power of appointment to designate
the charitable remainderman.
(3)Multiple remaindermen. The remainder interest may pass to more than one charitable organization as long as each organi-
zation is described in §§ 170(c) and 2055(a). Section 1.664–2(a)(6)(i).
(4)Alternative remaindermen. The trust instrument of a CRAT must provide a means for selecting alternative charitable re-
maindermen in the event the designated organization is not qualified at the time any payments are to be made to it from the
trust. Section 1.664–2(a)(6)(iv).
.06 Annotations for Paragraph 6, Prohibited Transactions, of the Sample Trust.
(1)Payment of the annuity amount. Payment of the annuity amount to the recipients is not considered an act of self-dealing
within the meaning of § 4941(d), as modified by § 4947(a)(2)(A), or a taxable expenditure within the meaning of § 4945(d),
as modified by § 4947(a)(2)(A). Section 53.4947–1(c)(2) of the Foundation and Similar Excise Taxes Regulations.
(2)Prohibitions against certain investments and excess business holdings. Prohibitions against investments that jeopardize
the exempt purpose of the trust for purposes of § 4944, as modified by § 4947(a)(2)(A), and against retaining any excess
business holdings for purposes of § 4943, as modified by § 4947(a)(2)(A), are required if the trust provides for payment of
part of an annuity amount to an organization described in § 170(c) and an estate tax charitable deduction is sought for this
interest. See § 4947(b)(3). See section 6.02 of this revenue procedure for an alternate provision that provides for payment
ofpartoftheannuitytoanorganizationdescribedin§170(c).
(3)Trust to continue in existence for benefit of charity. The governing instrument requirements of § 508(e) must be included
in the trust instrument if, after the termination of the annuity period: (i) the trust instrument provides that the trust shall
continue in existence for the benefit of the charitable remainderman and, as a result, the trust will become subject to the
provisions of § 4947(a)(1); and (ii) the trust will be treated as a private foundation within the meaning of § 509(a), as mod-
ified by § 4947(a)(1). Except as provided in paragraph 6 of the sample trust, the trust instrument may limit the application
of the provisions of § 508(e) to the period after the termination of the annuity period when the trust continues in existence
for the benefit of the charitable remainderman.
SECTION 6. ALTERNATE PROVISIONS FOR SAMPLE TESTAMENTARY CHARITABLE
REMAINDER ANNUITY TRUST — TWO LIVES, CONCURRENT AND CONSECUTIVE
INTERESTS
.01 Annuity Amount Stated as a Specific Dollar Amount.
(1)Explanation. As an alternative to stating the annuity amount as a fraction or percentage of the initial net fair market value
of the assets transferred to the trust, the annuity amount may be stated as a specific dollar amount. Section 1.664–2(a)(1)(ii)
and (iii). In either case, the annuity amount must be not less than 5 percent nor more than 50 percent of the initial net fair
market value of all property placed in trust. Section 664(d)(1)(A).
(2)Instructions for use.
(a)Replace the first sentence of paragraph 1, Payment of Annuity Amount, of the sample trust with the following sentence:
In each taxable year of the trust during the annuity period, the Trustee shall pay to [permissible recipient]andto
[permissible recipient] (hereinafter “the Recipients”) in equal shares during their lifetimes an annuity amount equal
to [the stated dollar amount], and upon the death of one (hereinafter “thePredeceasing Recipient”), the Trustee shall
pay the entire annuity amount (subject to any proration in paragraph 3) to the survivor (hereinafter “the Survivor
Recipient”).
(b)Delete the last sentence of paragraph 1, Payment of Annuity Amount, of the sample trust concerning the incorrect valu-
ation of trust assets.
.02 Payment of Part of the Annuity to an Organization Described in § 170(c).
(1)Explanation. An organization described in § 170(c) may receive part, but not all, of any annuity amount. Section
664(d)(1)(A). If an estate tax charitable deduction is sought for the present value of the annuity interest passing to a
charitable organization, the trust instrument must contain additional provisions. First, the trust instrument must specify
the portion of each annuity payment that is payable to the noncharitable recipients and to the charitable organization
described in §§ 170(c) and 2055(a). Second, the trust instrument must contain a means for selecting an alternative qualified
charitable organization if the designated organization is not a qualified organization at the time when any annuity amount
is to be paid to it. Third, the trust instrument must contain prohibitions against investments that jeopardize the exempt
purpose of the trust for purposes of § 4944, as modified by § 4947(a)(2)(A), and against retaining any excess business
holdings for purposes of § 4943, as modified by § 4947(a)(2)(A).
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(2)Instructions for use.
(a)Replace paragraph 1, Payment of Annuity Amount, of the sample trust with the following paragraph:
Payment of Annuity Amount. The annuity amount is equal to [a number no less than 5 and no more than 50] percent
of the initial net fair market value of all property passing to this trust as finally determined for federal estate tax
purposes. In each taxable year of the trust during the annuity period, the Trustee shall pay [the percentage of the
annuity amount payable to the noncharitable recipients] percent of the annuity amount to [permissible recipient]and
[permissible recipient] (hereinafter “the Recipients”) in equal shares during their joint lives, and upon the death of
one (hereinafter “the Predeceasing Recipient”), the Trustee shall pay that entire percentage of the annuity amount
(subject to any proration in paragraph 3) to the survivor (hereinafter “the Survivor Recipient”). In each taxable year
of the trust during the annuity period, the Trustee shall pay [the percentage of the annuity amount payable to the
charitable recipient] percent of the annuity amount to [an organization described in §§ 170(c) and 2055(a) of the
Code] (hereinafter “the Charitable Recipient”). The first day of the annuity period shall be the date of my death and
the last day of the annuity period shall be the date of the Survivor Recipient’s death. If the Charitable Recipient
is not an organization described in §§ 170(c) and 2055(a) of the Code at the time when any annuity payment is to
be distributed to it, then the Trustee shall distribute that annuity payment to one or more organizations described in
§§ 170(c) and 2055(a) of the Code as the Trustee shall select, and in the proportions as the Trustee shall decide, in the
Trustee’s sole discretion. The annuity amount shall be paid in equal quarterly installments at the end of each calendar
quarter from income, and to the extent income is not sufficient, from principal. Any income of the trust for a taxable
year in excess of the annuity amount shall be added to principal. If the initial net fair market value of the trust assets
is incorrectly determined, then within a reasonable period after the value is finally determined for federal estate tax
purposes, the Trustee shall pay to the Recipients and the Charitable Recipient (in the case of an undervaluation) or
receive from the Recipients and the Charitable Recipient (in the case of an overvaluation) an amount equal to the
difference between the annuity amount(s) properly payable and the annuity amount(s) actually paid.
(b)In paragraph 2, Deferral Provision, of the sample trust,replace each reference to “the Recipients” with a reference to
“the Recipients and the Charitable Recipient.”
(c)Replace the first parenthetical in paragraph 4, Distribution to Charity, of the sample trust with the following parenthetical:
(other than any amount due the Recipients or their estatesand the Charitable Recipient under the provisions above).
(d)Add the following sentence after the first and only sentence in paragraph 6, Prohibited Transactions, of the sample trust:
The Trustee shall not make any investments that jeopardize the exempt purpose of the trust for purposes of § 4944 of
the Code, as modified by § 4947(a)(2)(A) of the Code, or retain any excess business holdings for purposes of § 4943
of the Code, as modified by § 4947(a)(2)(A) of the Code.
.03 Qualified Contingency.
(1)Explanation. Under § 664(f), payment of the annuity amount may terminate upon the earlier of the occurrence of a qualified
contingency (as defined in § 664(f)(3)) or the death of the survivor recipient. The amount of the charitable deduction,
however, will be determined without regard to a qualified contingency. See § 664(f)(2).
(2)Instruction for use. Replace the second sentence of paragraph 1, Payment of Annuity Amount, of the sample trust with the
following sentence:
The first day of the annuity period shall be the date of my death and the last day of the annuity period shall be the date
of the Survivor Recipient’s death or, if earlier, the date on which occurs the [qualified contingency].
.04 Last Annuity Payments to the Recipients.
(1)Explanation. As an alternative to prorating the annuity amount in the taxable year of the predeceasing recipient’s death,
payment of the predeceasing recipient’s share of the annuity amount may terminate with the last regular payment preceding
the predeceasing recipient’s death. Similarly, as an alternative to prorating the annuity amount in the taxable year of the
termination of the annuity period, payment of the annuity amount may terminate with the last regular payment preceding
the termination of the annuity period. However, the fact that a recipient may not receive the last payment shall not be taken
into account for purposes of determining the present value of the remainder interest. Section 1.664–2(a)(5)(i).
(2)Instructions for use.
(a)To add an alternate provision to terminate the payment of the predeceasing recipient’s share of the annuity amount with
the last regular payment preceding his or her death, replace paragraph 3, Proration of Annuity Amount, of the sample
trust with the following paragraph:
Proration of Annuity Amount. Except as provided below, the Trustee shall prorate the annuity amount on a daily basis
for any short taxable year. The obligation of the Trustee to pay a share of the annuity amount to the Predeceasing
Recipient shall terminate with the regular quarterly installment next preceding the Predeceasing Recipient’s death.
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In the taxable year of the trust during which the annuity period ends, the Trustee shall prorate the annuity amount on
a daily basis for the number of days of the annuity period in that taxable year.
(b)To add an alternate provision to terminate the payment of the annuity amount with the last regular payment preceding
the termination of the annuity period, replace paragraph 3, Proration of Annuity Amount, of the sample trust with the
following paragraph:
Proration of Annuity Amount. Except as provided below, the Trustee shall prorate the annuity amount on a daily basis
for any short taxable year. Upon the death of the Predeceasing Recipient, the Trustee shall prorate on a daily basis the
Predeceasing Recipient’s share of the next regular annuity payment between the estate of the Predeceasing Recipient
and the Survivor Recipient. In the taxable year of the trust during which the annuity period ends, the obligation
of the Trustee to pay the annuity amount shall terminate with the regular quarterly installment next preceding the
termination of the annuity period.
(c)To add an alternate provision terminating the payment of the predeceasing recipient’s share of the annuity amount with
the last regular payment preceding his or her death, and terminating the payment of the annuity amount with the last
regular payment preceding the termination of the annuity period, replace paragraph 3, Proration of Annuity Amount, of
the sample trust with the following paragraph:
Proration of Annuity Amount. Except as provided below, the Trustee shall prorate the annuity amount on a daily basis
for any short taxable year. The obligation of the Trustee to pay a share of the annuity amount to the Predeceasing
Recipient shall terminate with the regular quarterly installment next preceding the Predeceasing Recipient’s death.
In the taxable year of the trust during which the annuity period ends, the obligation of the Trustee to pay the annuity
amount shall terminate with the regular quarterly installment next preceding the termination of the annuity period.
.05 Power of Appointment to Designate the Charitable Remainderman.
(1)Explanation. The trust instrument may grant a recipient a power of appointment to designate the charitable remainderman.
See Rev. Rul. 76–7, 1976–1 C.B. 179.
(2)Instruction for use. Replace paragraph 4, Distribution to Charity, of the sample trust with the following paragraph:
Distribution to Charity. At the termination of the annuity period, the Trustee shall distribute all of the then principal and
income of the trust (other than any amount due the Recipients or their estates under the provisions above) to one or more
charitable organizations described in §§ 170(c) and 2055(a) of the Code as [one of the named permissible recipients]
shall appoint and direct by specific reference to this power of appointment by inter vivos or testamentary instrument. To
the extent this power of appointment is not effectively exercised, the principal and income not effectively appointed shall
be distributed to one or more organizations described in §§ 170(c) and 2055(a) of the Code as the Trustee shall select,
and in the proportions as the Trustee shall decide, in the Trustee’s sole discretion. If an organization fails to qualify as
an organization described in §§ 170(c) and 2055(a) of the Code at the time when any principal or income of the trust
is to be distributed to it, then the Trustee shall distribute the then principal and income to one or more organizations
described in §§ 170(c) and 2055(a) of the Code as the Trusteeshall select, and in the proportions as the Trustee shall
decide, in the Trustee’s sole discretion.
SECTION 7. EFFECT ON OTHER REVENUE PROCEDURES
Section 8 of Rev. Proc. 90–32 is superseded.
DRAFTING INFORMATION
The principal authors of this revenue procedure are Karlene M. Lesho and Stephanie N. Bland of the Office of Associate Chief
Counsel (Passthroughs and Special Industries). For further information regarding this revenue procedure, contact Karlene M. Lesho
or Stephanie N. Bland at (202) 622–7830 (not a toll-free call).
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Part IV. Items of General Interest
Announcement of Disciplinary Actions Involving Attorneys,
Certified Public Accountants, Enrolled Agents, and Enrolled
Actuaries — Suspensions, Censures, Disbarments, and
Resignations
Announcement 2003-50
Under Title 31, Code of Federal Regu-
lations, Part 10, attorneys, certified public
accountants, enrolled agents, and enrolled
actuaries may not accept assistance from,
or assist, any person who is under disbar-
ment or suspension from practice before
the Internal Revenue Service if the assis-
tance relates to a matter constituting prac-
tice before the Internal Revenue Service
and may not knowingly aid or abet another
person to practice before the Internal Rev-
enue Service during a period of suspen-
sion, disbarment, or ineligibility of such
other person.
To enable attorneys, certified public
accountants, enrolled agents, and enrolled
actuaries to identify persons to whom
these restrictions apply, the Director, Of-
fice of Professional Responsibility will
announce in the Internal Revenue Bulletin
their names, their city and state, their pro-
fessional designation, the effective date
of disciplinary action, and the period of
suspension. This announcement will ap-
pear in the weekly Bulletin at the earliest
practicable date after such action and will
continue to appear in the weekly Bulletins
for five successive weeks.
Suspensions From Practice Before the Internal
Revenue Service After Notice and an Opportunity for a
Proceeding
Under Title 31, Code of Federal Regu-
lations, Part 10, after notice and an oppor-
tunity for a proceeding before an adminis-
trative law judge, the following individuals
have been placed under suspension from
practice before the Internal Revenue Ser-
vice:
NameAddressDesignationEffective Date
Arnold, JohnClovis, CAEnrolled AgentFebruary 13, 2003
to
August 12, 2003
Disbarments From Practice Before the Internal
Revenue Service After Notice and an Opportunity for a
Proceeding
Under Title 31, Code of Federal Regu-
lations, Part 10, after notice and an oppor-
tunity for a proceeding before an adminis-
trative law judge, the following individuals
have been disbarred from practice before
the Internal Revenue Service:
NameAddressDesignationEffective Date
Kalajian, ThomasLaguna Hills, CACPAOctober 2, 2002
Messman, CarlaOuting, MNEnrolled AgentJanuary 9, 2003
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Consent Suspensions From Practice Before the Internal
Revenue Service
Under Title 31, Code of Federal Regu-
lations, Part 10, an attorney, certified pub-
lic accountant, enrolled agent, or enrolled
actuary, in order to avoid the institution
or conclusion of a proceeding for his or
her disbarment or suspension from prac-
tice before the Internal Revenue Service,
may offer his or her consent to suspension
from such practice. The Director, Office
of Professional Responsibility, in his dis-
cretion, may suspend an attorney, certified
public accountant, enrolled agent or en-
rolled actuary in accordance with the con-
sent offered.
The following individuals have been
placed under consent suspension from
practice before the Internal Revenue Ser-
vice:
NameAddressDesignationDate of Suspension
Kemp, BartSonoma, CAAttorneyMarch 15, 2003
to
November 15, 2003
Marks, GaryHewlett, NYCPAMarch 24, 2003
to
March 23, 2004
Fehl, KennethPalo Alto, CAAttorneyApril 1, 2003
to
March 31, 2004
Cohen, PeterEdison, NJCPAApril 3, 2003
to
May 2, 2005
Kohn, MichaelSt. Louis, MOAttorneyIndefinite
from
April 30, 2003
Sogamoso, CarlosBellflower, CAEnrolled AgentIndefinite
from
May 1, 2003
Huston, JamesKingman, AZCPAMay 1, 2003
to
April 30, 2006
Halleran, EdwardCarle Place, NYEnrolled AgentIndefinite
from
May 1, 2003
Marshall, E. PeterGlens Falls, NYCPAMay 1, 2003
to
April 30, 2006
Bell, RosannaIrvington, NYCPAIndefinite
from
May 8, 2003
Kingsley, StevenWeston, CTCPAIndefinite
from
May 15, 2003
Schawe, RudolphBrenham, TXEnrolled AgentMay 22, 2003
to
October 21, 2004
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NameAddressDesignationDate of Suspension
Scheve, MichaelBaltimore, MDCPAIndefinite
from
May 27, 2003
McKenzie, DawnaFort Smith, AREnrolled AgentIndefinite
from
June 2, 2003
Suen, MingSan Francisco, CAEnrolled AgentIndefinite
from
June 3, 2003
Reyes, RupertoPlacentia, CAEnrolled AgentJune 10, 2003
to
December 9, 2005
Garmo, GeorgisW. Bloomfield, MICPAIndefinite
from
June 10, 2003
Holmes, James L.Burlington, NCEnrolled AgentIndefinite
from
June 18, 2003
Brooks, SandraSan Diego, CAEnrolled AgentIndefinite
from
June 20, 2003
Malley, WayneCupertino, CAEnrolled AgentIndefinite
from
June 27, 2003
Leininger, BarbaraLutz, FLEnrolled AgentIndefinite
from
June 27, 2003
Expedited Suspensions From Practice Before the
Internal Revenue Service
Under Title 31, Code of Federal Regu-
lations, Part 10, the Director, Office of Pro-
fessional Responsibility, is authorized to
immediately suspend from practice before
the Internal Revenue Service any practi-
tioner who, within five years from the date
the expedited proceeding is instituted (1)
has had a license to practice as an attorney,
certified public accountant, or actuary sus-
pended or revoked for cause or (2) has been
convicted of certain crimes.
The following individuals have been
placed under suspension from practice
before the Internal Revenue Service by
virtue of the expedited proceeding provi-
sions:
NameAddressDesignationDate of Suspension
Radwick, PeterWoodinville, WACPAIndefinite
from
March 10, 2003
Jellinger, RichardAnoka, MNAttorneyIndefinite
from
March 10, 2003
Au
gust 4, 2003
28
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NameAddressDesignationDate of Suspension
Deen, BillyMansfield, TXCPAIndefinite
from
March 10, 2003
Dougherty Jr, WilliamNewport News, VAAttorneyIndefinite
from
March 10, 2003
Abood, NormanOregon, OHAttorneyIndefinite
from
March 10, 2003
Matis, VendelRedlands, CAAttorneyIndefinite
from
March 31, 2003
Workman, AndrewPanama City, FLCPAIndefinite
from
March 31, 2003
Bagwell, Jr., NoelCunningham, TNAttorneyIndefinite
from
March 31, 2003
O’Brien, BrienSioux City, IAAttorneyIndefinite
from
March 31, 2003
Boykoff, FranklinPleasantville, NYAttorneyIndefinite
from
March 31, 2003
McKinnon, MarvaStatesville, NCAttorneyIndefinite
from
March 31, 2003
Bailey, Scott K.Eden Prairie, MNAttorneyIndefinite
from
March 31, 2003
Kim, KunAtlanta, GACPAIndefinite
from
March 31, 2003
Massari III, DomenicTampa, FLAttorneyIndefinite
from
May 12, 2003
Haugabrook II, TyroneValdosta, GAAttorneyIndefinite
from
May 19, 2003
Wester, JosephMontgomery, ALCPAIndefinite
from
May 19, 2003
Smercina, DavidSolon, OHCPAIndefinite
from
May 19, 2003
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Au
gust 4, 2003

NameAddressDesignationDate of Suspension
Pullings, RetnaWashington, DCAttorneyIndefinite
from
May 19, 2003
Boyd, JamesMendota Heights, MNAttorneyIndefinite
from
May 20, 2003
Spindler, JudithOmaha, NEAttorneyIndefinite
from
May 20, 2003
Wintroub, EdwardOmaha, NEAttorneyIndefinite
from
May 20, 2003
Brinker, PeterOmaha, NEAttorneyIndefinite
from
May 21, 2003
Valdes, AlfredoOld Greenwich, CTCPAIndefinite
from
May 21, 2003
Cruise, MichaelLincoln, NEAttorneyIndefinite
from
May 22, 2003
Schoppert, ThomasMinot, NDAttorneyIndefinite
from
June 2, 2003
White, PaulSmithfield, NCEnrolled AgentIndefinite
from
June 2, 2003
Brier, MichaelProvidence, RICPAIndefinite
from
June 16, 2003
Resignations of Enrolled Agents
Under Title 31, Code of Federal Regu-
lations, Part 10, an enrolled agent, in or-
der to avoid the institution or conclusion
of a proceeding for his or her disbarment
or suspension from practice before the In-
ternal Revenue Service, may offer his or
her resignation as an enrolled agent. The
Director, Office of Professional Responsi-
bility, in his discretion, may accept the of-
fered resignation.
The Director, Office of Professional
Responsibility, has accepted offers of
resignation as an enrolled agent from the
following individuals:
NameAddressDate of Designation
Evans, CarolineTiverton, RIMay 7, 2003
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Censure Issued by Consent
Under Title 31, Code of Federal Reg-
ulations, Part 10, in lieu of a proceeding
being instituted or continued, an attorney,
certified public accountant, enrolled agent,
or enrolled actuary, may offer his or her
consent to the issuance of a censure. Cen-
sure is a public reprimand.
The following individuals have con-
sented to the issuance of a Censure:
NameAddressDesignationDate of Censure
Pargas, Carlos B.Miami, FLCPAMarch 19, 2003
Malkasian, GarySacramento, CACPAMarch 27, 2003
Wilcox, Ronald E.Mt. Carmel, ILCPAApril 29, 2003
Wood, David T.Shawneetown, ILCPAMay 27, 2003
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gust 4, 2003

Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the ef-
fect:
Amplifieddescribes a situation where
no change is being made in a prior pub-
lished position, but the prior position is be-
ing extended to apply to a variation of the
fact situation set forth therein. Thus, if
an earlier ruling held that a principle ap-
plied to A, and the new ruling holds that the
same principle also applies to B, the earlier
ruling is amplified. (Compare withmodi-
fied,below).
Clarifiedis used in those instances
where the language in a prior ruling is
being made clear because the language
has caused, or may cause, some confusion.
It is not used where a position in a prior
ruling is being changed.
Distinguisheddescribes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modifiedis used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A
and B, the prior ruling is modified because
it corrects a published position. (Compare
withamplifiedandclarified, above).
Obsoleteddescribes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transac-
tions. This term is most commonly used in
a ruling that lists previously published rul-
ings that are obsoleted because of changes
in laws or regulations. A ruling may also
be obsoleted because the substance has
been included in regulations subsequently
adopted.
Revokeddescribes situations where the
position in the previously published ruling
is not correct and the correct position is
being stated in a new ruling.
Supersededdescribes a situation where
the new ruling does nothing more than re-
state the substance and situation of a previ-
ously published ruling (or rulings). Thus,
the term is used to republish under the
1986 Code and regulations the same po-
sition published under the 1939 Code and
regulations. The term is also used when
it is desired to republish in a single rul-
ing a series of situations, names, etc., that
were previously published over a period of
time in separate rulings. If the new rul-
ing does more than restate the substance
of a prior ruling, a combination of terms
is used. For example,modifiedandsu-
persededdescribes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previously
published ruling in a new ruling that is self
contained. In this case, the previously pub-
lished ruling is first modified and then, as
modified, is superseded.
Supplementedis used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names in
subsequent rulings. After the original rul-
ing has been supplemented several times, a
new ruling may be published that includes
the list in the original ruling and the ad-
ditions, and supersedes all prior rulings in
the series.
Suspendedis used in rare situations
to show that the previous published rul-
ings will not be applied pending some
future action such as the issuance of new
or amended regulations, the outcome of
cases in litigation, or the outcome of a
Service study.
Abbreviations
The following abbreviations in current use
and formerly used will appear in material
published in the Bulletin.
A—Individual.
Acq.—Acquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cumulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Cooperative.
Ct.D.—Court Decision.
CY—County.
D—Decedent.
DC—Dummy Corporation.
DE—Donee.
Del. Order—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Employer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduciary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Foreign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Federal Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grantee.
GP—General Partner.
GR—Grantor.
IC—Insurance Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited Partner.
LR—Lessor.
M—Minor.
Nonacq.—Nonacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Personal Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Partnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Real Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsidiary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Transferee.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpayer.
TR—Trust.
TT—Trustee.
U.S.C.—United States Code.
X—Corporation.
Y—Corporation.
Z—Corporation.
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Numerical Finding List
1
Bulletin 2003–27 through 2003–30
Announcements:
2003-45, 2003-28 I.R.B.73
2003-46, 2003-30 I.R.B.222
2003-47, 2003-29 I.R.B.124
2003-48, 2003-28 I.R.B.73
2003-50, 2003-30 I.R.B.281
Notices:
2003-38, 2003-27 I.R.B.9
2003-39, 2003-27 I.R.B.10
2003-40, 2003-27 I.R.B.10
2003-41, 2003-28 I.R.B.49
2003-42, 2003-28 I.R.B.49
2003-43, 2003-28 I.R.B.50
2003-44, 2003-28 I.R.B.52
2003-45, 2003-29 I.R.B.86
2003-46, 2003-28 I.R.B.53
2003-47, 2003-30 I.R.B.132
2003-48, 2003-30 I.R.B.133
Proposed Regulations:
REG-106736-00, 2003-28 I.R.B.60
REG-107618-02, 2003-27 I.R.B.13
REG-122917-02, 2003-27 I.R.B.15
Revenue Procedures:
2003-45, 2003-27 I.R.B.11
2003-46, 2003-28 I.R.B.54
2003-47, 2003-28 I.R.B.55
2003-48, 2003-29 I.R.B.86
2003-49, 2003-29 I.R.B.89
2003-50, 2003-29 I.R.B.119
2003-51, 2003-29 I.R.B.121
2003-52, 2003-30 I.R.B.134
Revenue Rulings:
2003-70, 2003-27 I.R.B.3
2003-71, 2003-27 I.R.B.1
2003-73, 2003-28 I.R.B.44
2003-74, 2003-29 I.R.B.77
2003-75, 2003-29 I.R.B.79
2003-77, 2003-29 I.R.B.75
2003-78, 2003-29 I.R.B.76
2003-79, 2003-29 I.R.B.80
2003-80, 2003-29 I.R.B.83
2003-81, 2003-30 I.R.B.126
2003-82, 2003-30 I.R.B.125
2003-83, 2003-30 I.R.B.128
2003-87, 2003-29 I.R.B.82
Treasury Decisions:
9061, 2003-27 I.R.B.5
Treasury Decisions— Continued:
9062, 2003-28 I.R.B.46
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2003-1 through 2003-26 is in Internal Revenue Bulletin 2003-27,
dated July 7, 2003.
20
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Findings List of Current Actions on
Previously Published Items
1
Bulletin 2003–27 through 2003–30
Notices:
89-79
Modified and superseded by
Rev. Proc. 2003-47, 2003-28 I.R.B.55
2001–70
Amplified by
Notice 2003-45, 2003-29 I.R.B.86
2001–74
Amplified by
Notice 2003-45, 2003-29 I.R.B.86
Proposed Regulations:
EE-86-88 (LR-279-81)
Withdrawn by
REG-122917-02, 2003-27 I.R.B.15
Revenue Procedures:
77-12
Amplified, modified, and superseded by
Rev. Proc. 2003-51, 2003-29 I.R.B.121
96-30
Modified and amplified by
Rev. Proc. 2003-48, 2003-29 I.R.B.86
2002-9
Modified by
Rev. Proc. 2003-45, 2003-27 I.R.B.11
Amplified and modified by
Rev. Proc. 2003-50, 2003-29 I.R.B.119
Modified and amplified by
Rev. Rul. 2003-81, 2003-30 I.R.B.126
2002-33
Amplified and modified by
Rev. Proc. 2003-50, 2003-29 I.R.B.119
2002-34
Superseded by
Rev. Proc. 2003-52, 2003-30 I.R.B.134
2003-3
Modified by
Rev. Proc. 2003-48, 2003-29 I.R.B.86
2003-15
Modified and superseded by
Rev. Proc. 2003-49, 2003-29 I.R.B.89
1
A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2003-1 through 2003-26 is in Internal Revenue Bulletin 2003-27, dated July 7, 2003.
Au
gust 4, 2003
ii
i
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03-31 I.R.B.

INDEX
Internal Revenue Bulletins
2003–27 through 2003–30
The abbreviation and number in parenthesis
following the index entry refer to the specific
item; numbers in roman and italic type follow-
ing the parentheses refer to the Internal Rev-
enue Bulletin in which the item may be found
and the page number on which it appears.
Key to Abbreviations:
AnnAnnouncement
CDCourt Decision
DODelegation Order
EOExecutive Order
PLPublic Law
PTEProhibited Transaction
Exemption
RPRevenue Procedure
RRRevenue Ruling
SPRStatement of Procedural
Rules
TCTax Convention
TDTreasury Decision
TDOTreasury Department Order
EMPLOYEE PLANS
Full funding limitations, weighted aver-
age interest rate for:
July 2003 (Notice 48) 30,133
Group health plan, COBRA, small em-
ployer plan exception (RR 70) 27,3
Minimum funding, entry age normal (RR
83) 30,128
EMPLOYMENT TAX
Extension of time, automatic extension
to file certain information returns and
exempt organization returns (TD 9061)
27,5; (REG-107618–02) 27,13
Proposed Regulations:
26 CFR 1.6081–1, amended;
1.6081–8, –9, added; 31.6081(a)–1,
revised; automatic extension of time
to file certain information returns
and exempt organization returns
(REG–107618–02) 27,13
Regulations:
26 CFR 1.6081–1T, removed; 1.6081–
8T, –9T, added; 31.6011(a)–5,
amended; 31.6051–1(d)(2)(i)(c),
amended; 31.6051–2(c), amended;
31.6081(a)–1, amended; 31.6081
(a)–1T, added; 602.101, amended;
EMPLOYMENT
TAX—Cont.
automatic extension of time to file
certain information returns and ex-
empt organization returns (TD 9061)
27,5
ESTATE TAX
Charitable lead trusts, sample forms (No-
tice 39) 27,10
EXCISE TAX
Group health plan, COBRA, small em-
ployer plan exception (RR 70) 27,3
EXEMPT
ORGANIZATIONS
Extension of time, automatic extension
to file certain information returns and
exempt organization returns (TD 9061)
27,5; (REG–107618–02) 27,13
Proposed Regulations:
26 CFR 1.6081–1, amended;
1.6081–8, –9, added; 31.6081(a)–1,
revised; automatic extension of time
to file certain information returns
and exempt organization returns
(REG–107618–02) 27,13
Regulations:
26 CFR 1.6081–1T, removed; 1.6081–
8T, –9T, added; 31.6011(a)–5,
amended; 31.6051–1(d)(2)(i)(c),
amended; 31.6051–2(c), amended;
31.6081(a)–1, amended; 31.6081
(a)–1T, added; 602.101, amended;
automatic extension of time to file
certain information returns and ex-
empt organization returns (TD 9061)
27,5
Revocations (Ann 48) 28,73
GIFT TAX
Charitable lead trusts, sample forms (No-
tice 39) 27,10
INCOME TAX
Advance refunding bonds, tax-exempt
bonds (RR 78) 29,76
INCOME TAX—Cont.
Assumption of a partner’s liabilities
not accounted for under section
752(a) and (b) (TD 9062) 28,46;
(REG-106736–00) 28,60
Backup withholding rate, reduced for
amounts paid after December 31, 2002
(Ann 45) 28,73
Compliance initiative, nonresident aliens
and foreign corporations (Notice 38)
27,9
Controlled foreign corporations, insur-
ance business treated as a domestic
corporation (RP 47) 28,55
Corporations:
Spin-offs, stock distributions:
Acquisition by an unrelated corpo-
ration (RR 79) 29,80
Requests for letter ruling or deter-
mination letter (RP 48) 29,86
Separation of two different busi-
nesses within the same corporate
group:
To concentrate on one business
(RR 74) 29,77
To resolve capital allocation
problem (RR 75) 29,79
Credits:
Enhanced oil recovery credit, 2003 in-
flation adjustment (Notice 43) 28,50
Low-income housing credit; commu-
nity service facility under section
42(d)(4)(C) of the Code (RR 77) 29,
75
Nonconventional source fuel credit,
qualified fuels under section
29(c)(1)(C), solid fuel from coal,
suspended private letter rulings
(Ann 46) 30,222
Deductions, limitations of section 277
membership organizations (RR 73) 28,
44
Depreciation of assets owned by a utility,
used in the general business operations,
asset class for (RR 81) 30,126
Disaster relief for September 11, 2001,
terrorist attack for:
Additional first year depreciation, au-
tomatic extension (RP 50) 29,119
Depreciation and mid-quarter conven-
tion relief, automatic extension of
time to make election (Notice 45) 29,
86
Disciplinary actions involving attorneys,
certified public accountants, enrolled
agents, and enrolled actuaries (Ann 50)
30,222
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INCOME TAX—Cont.
Electronic and magnetic filing, specifica-
tions for Forms 1098, 1099, 5498, and
W-2G (RP 52) 30,134
Enhanced oil recovery credit, 2003 infla-
tion adjustment (Notice 43) 28,50
Entity classification for certain foreign el-
igible entities (Notice 46) 28,53
Extension of time, automatic extension
to file certain information returns and
exempt organization returns (TD 9061)
27,5; (REG-107618–02) 27,13
Extraterritorial income exclusion,
changes to Form 8873 and its in-
structions (Ann 47) 29,124
Foreign corporations, compliance initia-
tive (Notice 38) 27,9
Forms, 8873, Extraterritorial Income Ex-
clusion, changes to form and instruc-
tions (Ann 47) 29,124
Government obligations, state and subdi-
visions:
Allocation deadline for private activity
bond state ceiling (Notice 41) 28,49
Assignment deadline for private activ-
ity bond volume cap (Notice 42) 28,
49
Carryforward election of unused pri-
vate activity bond volume cap (RP
46) 28,54
Interest:
Investment:
Federal short-term, mid-term, and
long-term rates for:
July 2003 (RR 71) 27,1
Inventory:
LIFO, price indexes used by depart-
ment stores for:
May 2003 (RR 87) 29,82
Valuation, acquired in liquidation of
lump sum purchase (RP 51) 29,121
Marginal production rates, 2003 (Notice
44) 28,52
Marginal properties, oil and gas produc-
tion, depletion, 2003 percentages (No-
tice 44) 28,52
Methods of accounting, LIFO, automatic
consent (RP 45) 27,11
New York Liberty Bonds, tax-exempt
bonds (Notice 40) 27,10
Nonconventional source fuel credit, qual-
ified fuels under section 29(c)(1)(C),
solid fuel from coal, suspended private
letter rulings (Ann 46) 30,222
Nonresident aliens, compliance initiative
(Notice 38) 27,9
INCOME TAX—Cont.
Proposed Regulations:
26 CFR 1.358–7, added; 1.704–1,
–2, amended; 1.705–1, amended;
1.752–0, amended; 1.752–1, –5,
amended; 1.752–6, –7, added;
assumption of partner liabilities
(REG– 106736–00) 28,60
26 CFR 1.421–1 through –7 , removed;
1.421–7 redesignated as 1.421–1
and amended; 1.421–8 redesignated
as 1.421–2 and amended; 1.422–1,
–2, –4, –5, added; 1.422–4, re-
moved; 1.422–5 redesignated as
1.422–3; 1.423–1, –2, amended;
1.425–1 redesignated as 1.424–1
and amended; 1.6039–1, removed;
1.6039–2 redesignated as 1.6039–1
and revised; statutory options
(REG–122917–02) 27,15
26 CFR 1.6081–1, amended;
1.6081–8, –9, added; 31.6081(a)–1,
revised; automatic extension of time
to file certain information returns
and exempt organization returns
(REG–107618–02) 27,13
Publications, 1220, Specifications for Fil-
ing Forms 1098, 1099, 5498, and W-2G
Electronically or Magnetically (RP 52)
30,134
Qualified census tracts, issuers of qual-
ified mortgage bonds and mortgage
credit certificates; correction (RP 49)
29,89
Qualified tertiary injectant expenses and
enhanced oil recovery credit (RR 82)
30,125
Regulations:
26 CFR 1.752–6T, added; assumption
of partner liabilities (TD 9062) 28,
46
26 CFR 1.6081–1T, removed; 1.6081–
8T, –9T, added; 31.6011(a)–5,
amended; 31.6051–1(d)(2)(i)(c),
amended; 31.6051–2(c), amended;
31.6081(a)–1, amended; 31.6081
(a)–1T, added; 602.101, amended;
automatic extension of time to file
certain information returns and ex-
empt organization returns (TD 9061)
27,5
Revocations, exempt organizations (Ann
48) 28,73
Statute of limitations on assessment as af-
fected by bankruptcy (RR 80) 29,83
INCOME TAX—Cont.
Stocks, statutory stock options
(REG–122917–02) 27,15
Tax-exempt bonds:
Advance refunding bonds (RR 78) 29,
76
New York Liberty Bonds (Notice 40)
27,10
Transfers of nonstatutory stock options to
related persons (Notice 47) 30,132
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