New Regulations Issued for Transfers to Foreign Trusts

The IRS has issued proposed regulations for recognizing gain on transfers of appreciated property to foreign trusts and estates. The Taxpayer Relief Act of 1997 (TRA ’97) imposed an income tax on such transfers in place of an excise tax. But TRA ’97 also allowed the IRS to design exceptions to the new tax under §684.

According to the proposed regulations, the following would be exceptions from the general gain recognition rule:

1. Transfers to a foreign trust that is owned by another person;
2. Transfers to a foreign trust that has received a §501(c)(3) exemption ruling;
3. Transfers (that satisfy certain conditions) made at death; and
4. Transfers to an unrelated foreign trust for fair market value.

The effective date of the proposed regulations is August 7, 2000. To view the document online and to submit comments, go to www.irs.gov/tax_regs/regslist.html.