Compliance
CRAT Transactions Now Reportable: Listed Transaction Rules You Need to Know
IRS final regs issued July 2026 target abusive Charitable Remainder Annuity Trust arrangements, forcing disclosure and penalties for non-compliance.
By NomadicTax Research Team • 5-8 min read • July 18, 2026
## What’s Changing for CRAT-Type Arrangements
In **final regulations released July 8, 2026** (Reg-TD 10051, IRS-2026-82), the IRS and Treasury declared certain arrangements masquerading as **Charitable Remainder Annuity Trusts (CRATs)** to be **listed transactions**. That means: strict reporting requirements, disclosure duties, and significant penalties for non-disclosure. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-issue-final-regulations-naming-certain-charitable-remainder-annuity-trust-transactions-as-listed-transactions?utm_source=openai))
A CRAT becomes a listed transaction under these rules if:
- Appreciated property (value above basis), often in closely-held business or trade assets, is transferred to the CRAT;
- CRAT then sells the property and uses proceeds to purchase a **single-premium immediate annuity (SPIA)**;
- The transaction misuses rules under IRC § 72 and § 664 to treat income improperly (claiming only the ‘income portion’ of the annuity is taxable). ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-issue-final-regulations-naming-certain-charitable-remainder-annuity-trust-transactions-as-listed-transactions?utm_source=openai))
These final regulations adopt the proposed version issued in March 2024, with **no changes**. Effective date is **July 9, 2026**, the date published in the Federal Register. ([kpmg.com](https://kpmg.com/us/en/taxnewsflash/news/2026/07/final-regs-charitable-remainder-annuity-trust-transactions-listed-transactions.html?utm_source=openai))
## Who is Impacted & What Must Be Done
Affected parties include both **taxpayers** who participate in such transactions and **material advisors** (those who sell, promote, advise, or assist) in them. Penalties may apply to both sides. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-issue-final-regulations-naming-certain-charitable-remainder-annuity-trust-transactions-as-listed-transactions?utm_source=openai))
Key Responsibilities:
- **Taxpayers**: If you participate, you must disclose the transaction using **Form 8886, Reportable Transaction Disclosure Statement**. Failing to do so can trigger disclosure penalties.
- **Material advisors**: Must file **Form 8918, Material Advisor Disclosure Statement**, in addition to other obligations.
## Example to Illustrate
Jane owns land worth $500,000 (basis $100,000). She transfers it into a trust claiming it's a qualified CRAT, then sells it, and uses proceeds to buy a SPIA. She then claims only the income portion of the annuity each year and asserts no tax or gain.
Under the new rules, this arrangement is now a listed transaction. Jane must disclose participation. The material advisor (e.g., the attorney or consultant who designed the transaction) must also file. Otherwise, both risk penalties.
If Jane instead uses a properly structured CRAT that meets all statutory requirements—including no mis-treatment of annuity income or SPIA misuse—then this regulation does **not** apply. Only abusive arrangements are listed.
## Actionable Tips
- If you’ve entered or are considering a CRAT or SPIA combo that seems to shift income or gain improperly—consult a tax attorney.
- Determine whether your transaction meets the “abusive” characteristics as defined in the regulation. If yes, ensure compliance via Forms 8886 or 8918.
- Keep thorough records: basis of transferred property, contract terms, SPIA purchase date/value, and how annuity payments are taxed.
## Summary
The IRS is cracking down on abusive CRAT-SPIA schemes by making them reportable listed transactions as of July 9, 2026. Better safe than sorry—if your structure resembles the ones described, you’ll want to ensure full disclosure and compliance immediately.