Essay
When Silence Becomes the Violation: The IRS Lists Abusive CRAT Transactions
Would you administer a trust built to erase the gain on a business sale?
The Treasury and IRS just made that question sharper. In final regulations issued in July 2026, the government named a specific charitable remainder annuity trust (CRAT) structure a listed transaction — the most serious tier of the IRS’s reportable-transaction regime.
The mechanism the IRS is targeting
The pattern is precise. A taxpayer transfers appreciated property — often closely held business interests — into a purported CRAT. The trust sells the property and uses the proceeds to buy a single premium immediate annuity (SPIA). Then the promoters claim that the annuity payments back to the donor are taxable only to the extent of the annuity’s income portion under §72, while leaning on the CRAT’s §664 treatment to make the capital gain on the original sale simply vanish.
That is not charitable planning. It is a sale dressed as a gift, engineered so the tax on the sale never appears.
Why “listed” changes everything
Naming a transaction “listed” doesn’t merely disapprove of it — it flips the burden. Material advisors and participants now have an affirmative duty to disclose. As I put it when the regs dropped: the structure served real donors too, but now silence is the violation, not the strategy. Fail to report a listed transaction and the penalties attach to the non-disclosure itself, independent of whether the underlying position is ever disallowed.
For anyone in a fiduciary seat, that is the entire lesson. A legitimate CRAT — one where the charity genuinely comes first and the numbers are what they say they are — has nothing to hide and nothing to fear from a disclosure form. The trusts that fear the paperwork are telling you something.
The fiduciary read
Charitable trusts remain one of the most elegant tools in wealth transfer, and I cover the honest versions in the Wealth Guide — using a charitable remainder trust to unwind a concentrated position with less tax drag, income for life, and a real gift at the end. The IRS is not attacking that. It is drawing a bright line between planning and laundering, and asking advisors to stand on the right side of it in writing.
Duty is the point. A trustee’s signature should never be the quietest part of a transaction.
Source: Treasury, IRS issue final regulations naming certain CRAT transactions as listed transactions (IRS, IR-2026-82). Educational only — not legal or tax advice.