Daily Tax Update - January 17, 2014: IRS Issues Proposed Regulations on Calculating Beneficiary’s Basis in a Charitable Remainder Trust

IRS Issues Proposed Regulations on Calculating Beneficiary’s Basis in a Charitable Remainder Trust:  The IRS issued proposed regulations for calculating a taxable beneficiary’s basis in a charitable remainder trust (CRT) under I.R.C. Section 1014. The proposed regulations apply to the situation where a beneficiary sells all its interests in the CRT after the CRT has sold some assets and reinvested the proceeds without payment of income tax. In such a case, the proposed regulations provide that the taxable beneficiary does not inherit a basis step-up for the trust’s investment in new assets, since that basis is attributable to tax-exempt gains.  This result is accomplished by reducing the taxable beneficiary’s “uniform basis” – the allocated portion of the trust’s stepped-up basis in assets – by the amount of the trust’s undistributed ordinary net income and undistributed net capital gain.

Comments and hearing requests are due by April 17.   

The proposed regulations can be accessed here.

Australian Tax Office might outsource some audit and assurance functions to large companies’ own auditors:  ATO released a Discussion Draft on January 16 detailing a program, the External Compliance Assurance Process (ECAP), that if adopted would allow large companies to use their own auditors for assurance of facts in tax matters. The proposed program would be available to taxpayers rated medium-risk with turnover between AUD 100m and AUD 5bn. Review by a company’s own auditor is limited to factual matters in cases where the law is clear. In the case of an audit or other ATO inquiry, eligible taxpayers would have the option of an ATO review or review by their own auditor. Eligible taxpayers could also use the ECAP for confirmation of compliance, for example as a substitute for a private binding ruling, about issues prior to ATO’s expression of an audit interest. The ATO began its initial consultation about the proposal in mid-December 2013.