Charitable Remainder Annuity Trusts Constitute "Listed Transactions" Under New IRS Regulations
Posted in Offshore Account Update on July 17, 2026 | Share
In July 2026, the Internal Revenue Service (IRS) published new regulations that identify Charitable Remainder Annuity Trusts (CRATs) as “listed transactions.” For U.S. taxpayers who use CRATs for tax mitigation purposes, managing compliance with the IRS’ listed transaction rules will be critical moving forward.
The Internal Revenue Service (IRS) issued final regulations on July 8, 2026 that identify Charitable Remainder Annuity Trusts (CRATs) as “listed transactions.” This means the IRS has identified CRATs as potential abusive tax shelters, and U.S. taxpayers with CRATs must now comply with additional reporting requirements. Learn more from Washington, D.C. tax evasion attorney Kevin E. Thorn, Managing Partner of Thorn Law Group:
When Does the IRS Consider a CRAT to Be an Abusive Tax Shelter?
When the IRS announced the issuance of its new final regulations, it also spelled out the circumstances in which it considers a Charitable Remainder Annuity Trust to be an abusive tax shelter. According to the IRS, a CRAT is abusive if:
- Property with a fair market value in excess of its basis is transferred to the CRAT;
- The CRAT sells the property and uses some or all of the proceeds to acquire a single premium immediate annuity (SPIA); and,
- The taxpayer or a beneficiary claims that the annuity “is taxable to the recipient only to the extent of the income portion of the SPIA annuity payment.”
Allegations of using a CRAT to evade federal tax liability can lead to substantial penalties—including criminal penalties in some cases. As a result, taxpayers must be careful to avoid these allegations; and, when using CRATs for tax mitigation purposes, taxpayers should thoroughly document their efforts to maintain compliance with the Internal Revenue Code.
What Are the Implications of CRATs Being Labeled as “Listed Transactions?”
Now that the IRS has labeled CRATs as listed transactions, taxpayers with CRATs have additional reporting obligations. Failure to meet these obligations can lead to substantial penalties as well. Additionally, taxpayers that fail to properly report their CRATs will be at increased risk of facing scrutiny from the IRS, and this scrutiny could lead to serious allegations of tax evasion or tax fraud.
How a Washington D.C. Tax Evasion Attorney at Thorn Law Group Can Help
Our attorneys provide experienced legal representation for federal tax compliance and defense. Whether you have questions about your reporting obligations or you have concerns about facing IRS scrutiny, we can provide strategic advice and representation custom-tailored to your individual circumstances. We have extensive experience representing high-net-worth taxpayers, and we have a long track record of success in IRS audits and enforcement proceedings.
Contact Us to Arrange a Confidential Consultation
If you need to know more about the IRS’ ongoing efforts to target Charitable Remainder Annuity Trusts, we invite you to get in touch. To arrange a confidential consultation with Washington, D.C. tax evasion attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, please call 202-349-4033 or contact us confidentially online today.
