In Cristofani, (8) the Tax Court allowed a present-interest exclusion based on a contingent remainder
beneficiary's right to withdraw a portion of a gift to the trust.
X7XP [section]1361(e)(1)(A)(i) prescribes that, prior to 1998, charitable organizations may hold only contingent remainder
interests in an ESBT.
T]he IRS will deny exclusions for powers held by individuals who either have no property interests in the trust except for Crummey powers, or hold only contingent remainder
Note that, for 1997, certain charitable organizations may hold only contingent remainder
interests and cannot be beneficiaries.
The Service has indicated its intent to deny exclusions for gifts to holders of Crummey withdrawal powers when (1) the powerholders have no beneficial interest in the trust other than their withdrawal powers; (2) the powerholders hold only contingent remainder
interests or discretionary income interests; or (3) the facts and circumstances indicate a prearranged understanding that the powerholder will not exercise his or her withdrawal power.
It was held that the value of the gift of the contingent remainder
interest equaled the market value of the property transferred, minus (1) the present value of the grantor's retained income interest in the property (determined under Sec.
Joint tenancy has been characterized as a specialized form of a life estate, amounting to a contingent remainder
in the fee, the contingency being dependent on which joint tenant survives.
2503(a) annual exclusions for gifts in trust to beneficiaries holding only contingent remainder
interests, coupled with a Crummey(16) withdrawal right.
of Cristofani,(10) the IRS argued that the beneficiaries in Crummey had, in addition to the immediate right of withdrawal, "substantial, future economic benefits" in the trust, while the Cristofani beneficiaries had only a withdrawal right and a contingent remainder
This may cause wastage of the GSTT exemption if the grandchildren are merely contingent remainder
interest holders and not ultimate distributees.
all of the trusts beneficiaries must be individuals or estates eligible to be S shareholders (however, charitable organizations may hold contingent remainder
A charitable organization can even have a contingent remainder
interest in an ESBT However, for purposes of dealing with the number of shareholders, each potential ESBT income beneficiary is counted as a shareholder.