When Does a Charitable Remainder Annuity Trust Constitute a "Listed Transaction?"

The Internal Revenue Service (IRS) recently labeled most Charitable Remainder Annuity Trusts (CRATs) as “listed transactions.” While this does not mean that CRATs are inherently unlawful, it does mean that the IRS is paying particular attention to U.S. taxpayers who use CRATs for tax mitigation purposes.

Charitable Remainder Annuity Trusts (CRATs) can be effective tools for federal tax mitigation. However, due to perceived widespread abuse, the Internal Revenue Service (IRS) has been paying particular attention to taxpayers that use CRATs in recent years. Most recently, the IRS labeled CRATs as “listed transactions,” meaning that taxpayers who use CRATs now have additional reporting obligations. Learn more from New Jersey tax evasion attorney Kevin E. Thorn, Managing Partner of Thorn Law Group:

When Does a CRAT Constitute a “Listed Transaction?”

The IRS issued new final regulations labeling most CRATs as “listed transactions” on July 8, 2026. Under these new regulations, a CRAT constitutes a listed transaction if it meets the following requirements:

• “The grantor creates a trust purporting to qualify as a charitable remainder annuity trust under section 664(d)(1) of the Internal Revenue Code (Code);
• “The grantor funds the trust with property having a fair market value in excess of its basis (contributed property);
• “The trustee sells the contributed property;
• “The trustee uses some or all of the proceeds from the sale of the contributed property to purchase an annuity; and
• “On a Federal income tax return, the beneficiary of the trust treats the annuity amount payable from the trust as if it were, in whole or in part, an annuity payment subject to section 72 of the Code . . . .”

To be clear, CRATs are not inherently unlawful. Taxpayers can continue to use CRATs for valid tax planning purposes. However, taxpayers that use CRATs are now at greater risk of facing IRS scrutiny; and, when facing scrutiny, taxpayers must be prepared to affirmatively demonstrate that their trusts and annuities are federally compliant.

What if My CRAT Qualifies as a “Listed Transaction?”

Taxpayers with Charitable Remainder Annuity Trusts that qualify as listed transactions under the IRS’ new regulations must report their CRATs to the IRS on an annual basis. Even if a CRAT does not amount to an abusive tax shelter, failing to disclose it to the IRS can still trigger significant penalties.

How a New Jersey Tax Evasion Attorney at Thorn Law Group Can Help

If you have questions about your federal tax compliance obligations related to a CRAT, a New Jersey tax evasion attorney at our firm can help you understand what is required. If you are facing scrutiny (or have concerns about facing scrutiny) from the IRS, we can help you in this scenario as well. We have extensive experience representing high-income and high-net-worth taxpayers in federal tax matters, and we have a proven track record of helping our clients avoid unnecessary consequences.

Request a Call with Managing Partner Kevin E. Thorn

For more information about how the IRS is targeting taxpayers with Charitable Remainder Annuity Trusts, contact us today. Call 201-842-7696 or contact us online to request a call with New Jersey tax evasion attorney Kevin E. Thorn, Managing Partner of Thorn Law Group.