Payments From Charitable Annuity Trust Are Taxable Distributions

The annuity payments received by several individuals who contributed real estate and other property to charitable remainder annuity trusts (CRATs) were taxable distributions, the US Tax Court ruled Thursday.

The taxpayers—six individuals who share the surname, “Gerhardt"—argued that they could receive most of the sales proceeds from properties they contributed into the trusts tax-free. The arrangement involved contributing real estate and other property to the trusts, which then sold the property and used most of the proceeds to buy five-year annuities, naming the Gerhardts as the annuity payment recipients.

Charitable remainder annuity trusts are exempt from income tax and may ...