Charitable remainder trust

Taxation
The tax treatment of Charitable Remainder Trust distributions to income recipients is determined according to the rules established in  U.S.C. § 664 : US Code - Section 664: Charitable remainder trusts. A charitable remainder trust assumes the holding period and cost basis of assets transferred to it and will ordinarily pay no tax on income realized through the holding and sale of trust assets. . Distributions made to income recipients are considered taxable according to the four-tier system set out in Reg. §1.664-1(d)(1)(i)]. Generally all income from one tier must be reported and exhausted before income from the next tier down can be reported. States may also have additional tax rules on distributions. The four tiers are as follows:


 * 1) Ordinary income. This includes interest income, dividend income, and rent income from real estate.
 * 2) Capital Gains. Income from the sale of appreciated assets such as stocks, bonds, and real estate.
 * 3) Tax Exempt Income. This mainly includes income from municipal tax-exempt bonds.
 * 4) Return of Principal (Corpus). Income taken from principal.

Articles

 * Charitable Remainder Trusts
 * CRTs by the Numbers Barlow Mann (January 2007)