Charitable Remainder Trust

§ 664. Charitable remainder trusts(a) General ruleNotwithstanding any other provision of this subchapter, the provisions of this section shall, in accordance with regulations prescribed by the Secretary, apply in the case of a charitable remainder annuity trust and a charitable remainder unitrust. (b) Character of distributionsAmounts distributed by a charitable remainder annuity trust or by a charitable remainder unitrust shall be considered as having the following characteristics in the hands of a beneficiary to whom is paid the annuity described in subsection (d)(1)(A) or the payment described in subsection (d)(2)(A):(1) First, as amounts of income (other than gains, and amounts treated as gains, from the sale or other disposition of capital assets) includible in gross income to the extent of such income of the trust for the year and such undistributed income of the trust for prior years; (2) Second, as a capital gain to the extent of the capital gain of the trust for the year and the undistributed capital gain of the trust for prior years; (3) Third, as other income to the extent of such income of the trust for the year and such undistributed income of the trust for prior years; and (4) Fourth, as a distribution of trust corpus. For purposes of this section, the trust shall determine the amount of its undistributed capital gain on a cumulative net basis. (c) Taxation of trusts(1) Income taxA charitable remainder annuity trust and a charitable remainder unitrust shall, for any taxable year, not be subject to any tax imposed by this subtitle. (2) Excise tax(A) In generalIn the case of a charitable remainder annuity trust or a charitable remainder unitrust which has unrelated business taxable income (within the meaning of section 512, determined as if part III of subchapter F applied to such trust) for a taxable year, there is hereby imposed on such trust or unitrust an excise tax equal to the amount of such unrelated business taxable income. (B) Certain rules to applyThe tax imposed by subparagraph (A) shall be treated as imposed by chapter 42 for purposes of this title other than subchapter E of chapter 42. (C) Tax court proceedingsFor purposes of this paragraph, the references in section 6212(c)(1) to section 4940 shall be deemed to include references to this paragraph. (d) Definitions(1) Charitable remainder annuity trustFor purposes of this section, a charitable remainder annuity trust is a trust—(A) from which a sum certain (which is not less than 5 percent nor more than 50 percent of the initial net fair market value of all property placed in trust) is to be paid, not less often than annually, to one or more persons (at least one of which is not an organization described in section 170(c) and, in the case of individuals, only to an individual who is living at the time of the creation of the trust) for a term of years (not in excess of 20 years) or for the life or lives of such individual or individuals,