Newsletter Vol. 1, No. 1 September 1997

TRA '97 included restrictions on charitable remainder trusts. Such trusts have been used to reduce the tax cost on dispositions of highly appreciated capital gain property, including founders stock in companies with initial public offerings. Under TRA '97, the annual percentage payout may not exceed 50% of the annual net value of unitrust trust assets (50% of initial value for an annuity trust), and the value of the charitable remainder interest must be at least 10% of the vaiue of the property contributed to the trust. This was done to limit the use of such trusts, to which non-income producing low-basis property was contributed, the property was then sold by the trust free of income tax and distributions are made within a year which were claimed to be tax-free or capital gain distribu tions. However, planning opportunities remain.

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