Case Studies
Strengthening Oversight: New Rules for Charitable Remainder Annuity Trusts
Final regulations now treat certain CRAT arrangements as listed transactions, forcing disclosure and penalties for misused sales-and-annuity trades—here’s how to stay compliant.
By NomadicTax Research Team • 5-8 min read • July 12, 2026
## What’s Changing with CRATs and Listed Transactions?
On **July 8, 2026**, the Treasury and IRS issued **final regulations** (IR-2026-82) that identify certain transactions involving **Charitable Remainder Annuity Trusts (CRATs)** as **listed transactions**—meaning they require special reporting and carry penalties for non-disclosure. These rules target abusive arrangements where ordinary or capital gains are improperly eliminated.([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 Features of the Regulations
Abusive schemes typically include:
- Transferring **property with low basis and high value** (e.g., business interests or trade assets) into a purported CRAT.
- The CRAT then **sells the property** and uses proceeds to purchase a **single premium immediate annuity (SPIA)**.
- Taxpayer or beneficiary claims that only the income portion of SPIA payments is taxable, avoiding tax on gains improperly.([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))
Under the new rules, these types of arrangements are now
- Designated as **listed transactions**—requiring disclosure by **material advisors** and participants;
- Subject to **penalties** if disclosure is not made.([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))
## Compliance Implications for Tax-Advisors & Taxpayers
### Material Advisors
Those who design or promote these transactions must:
- Identify the arrangement as a listed transaction when required;
- Maintain disclosure files;
- Be ready for enforcement action or penalties.
### Taxpayers/Beneficiaries
If you’re involved or considering this kind of CRAT transaction:
- You must disclose participation when filing tax returns;
- Ensure accurate reporting of income vs. gain;
- Beware aggressive tax planning that may draw IRS scrutiny under these rules.
## Example Scenario
**Before**: A taxpayer with a closely-held business contributes company stock (basis \$100, value \$1,000,000) into a CRAT. The CRAT sells it, buys a SPIA, and the beneficiary treats this as mostly annuity “income”, deferring or eliminating capital gain.
**After regulations**: This arrangement is automatically a listed transaction. Material advisors must disclose the activity, and the taxpayer must properly report the entirety of taxable income. Failure to do so risks penalties.
## What You Should Do Now
- **Consult with legal counsel or tax advisor** before entering into any CRAT + SPIA combinations with property that has large built-in gains.
- **Track basis and value** carefully—IRS wants clarity where basis is low and value high.
- **Disclose early** if required to avoid penalties. The entire transaction should be transparent.
## Takeaway
The final regulations targeting certain CRAT arrangements tighten rules on what had been aggressive tax planning. If your strategy involves trusts, trusts making sales of contributed property and purchasing annuities, this is one area you need to audit carefully. **Better to avoid or fully comply than face penalties later.**