Internal Revenue Service sign at the IRS Building in Washington, DC. Proceed With Caution: Shifting Beneficial Interests in a Trust May Trigger Gifts
"The good news is that the CCA was limited to a discreet issue involving a specific trust," writes Daniela P. Catrocho of Day Pitney. The bad news is that "the CCA could theoretically apply to other scenarios."
March 19, 2024 at 11:00 AM
8 minute read
At the end of 2023, the Internal Revenue Service dropped a Chief Counsel Advice Memorandum that has caused a stir in the world of estate and gift tax planning. In CCA 202352018, issued on Dec. 29, 2023 (the CCA), the IRS concluded that the beneficiaries of a grantor trust made a taxable gift to the grantor as a result of a trust modification to add a provision in the trust that would permit the trustee to reimburse the grantor for income taxes attributable to the trust. While taxpayers cannot rely on this CCA as official IRS guidance, it nevertheless outlines the IRS's position on this issue, which could potentially have sweeping implications for the modification, decanting and the administration of irrevocable trusts.
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