In PLR 200747001 (Aug. 3, 2007), the IRS made the following rulings re a proposed charitable lead trust ("CLAT"), which would be funded with S corp stock:
1. The funding of CLAT will be a completed gift for federal gift tax purposes.
2. The annuity payable under the trust agreement will qualify as a guaranteed annuity under IRC Sec. 2522(c)(2)(B).
3. Husband and Wife will be entitled to federal gift tax charitable deductions under IRC Sec/ 2522 for the present value of the annuity payments from CLAT, to be allocated between Husband and Wife in proportion to their reported gifts to CLAT.
4. No portion of CLAT will be includible in Husband and/or Wife's gross estates for federal estate tax purposes.
5. CLAT will be an eligible shareholder of Corporation for purposes of Corporation's status as a subchapter S corporation.
6. Husband and Wife will be entitled to a federal income tax charitable deduction under IRC Sec. 170(a) for the value of the charitable annuity interest at the date of contribution.
7. Trust will not have excess business holdings and will not be subject to excise tax under IRC Sec. 4943.
Posted by Lewis J. Saret, General Editor, Wealth Strategies Journal.
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