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CHARITABLE LEAD TRUSTSremainder trust and the pooled income fund, 2 it is a split-interest trust. Pursuantto a charitable lead trust, an income interest in property is contributed to a charitableorganization, either for a term of years or for the life of one individual or thelives of more than one individual. The remainder interest in the property isreserved to return, at the expiration of the income interest (the lead period), to thedonor or some other noncharitable beneficiary or beneficiaries; often the propertypasses from one generation (the donor’s) to another.The charitable lead trust can be used to accelerate a series of charitable contributions,that would otherwise be made annually, into one year, with a correspondingsingle-year deduction for the “bunched” amount of charitable gifts.In some circumstances, a charitable deduction is available for the transfer ofan income interest in property to a charitable organization. There are stringentlimitations, however, on the deductible amount of charitable contributions ofthese income interests.A charitable lead trust can be funded by a donor or donors during lifetime,as well as by means of transfers from an estate.The charitable lead trust is frequently used to transfer property from onemember of a family to another, usually from one generation to the next. Forexample, a father may establish a charitable lead trust, providing income fromthe trust to a charitable organization for a term of years, with the trust corpus topass thereafter to his daughter. This type of transfer may be subject to a gift tax,but the actual tax cost of the gift is substantially reduced because of the reductionin the amount transferred to the ultimate beneficiary by the value of theincome interest contributed to a charitable organization. If a charitable lead trustis used to shift property to a generation other than the immediate next one, thetransfer may be subject to the generation-skipping transfer tax. 3§ 16.2 INCOME INTERESTThe income interest created for a charitable organization by means of a charitablelead trust is defined in one of two ways. The income interest may be stated asa guaranteed annuity or as an annual payment equal to a fixed percentage of thefair market value of the trust property, valued annually. 4 These interests have thesame names as in the charitable remainder trust context; the first of these interestsis an annuity interest and the other is a unitrust interest. 5 Thus, there can be acharitable lead annuity trust or a charitable lead unitrust. The annuity interest orunitrust interest must be received at least annually. 6 As with a charitable remaindertrust, the charitable lead trust annuity interest or unitrust must qualify asone or the other in all respects. 72 See Chapters 12, 13, respectively.3 See § 8.5. The IRS announced, in mid-2003, that it intends to publish, for the first time, prototype forms to beused in the creation of charitable lead trusts, and sought comments as to the type of format to be used, the substantiveprovisions to be included, and the various types of charitable lead trust for which sample forms “wouldbe most helpful.” Notice 2003-39, 2003-27 I.R.B. 10.4 IRC § 170(f)(2)(B); Reg. § 1.170A-6(c)(4).5 See §§ 12.2(a), 12.3(a).6 Reg. § 1.170A-6(c)(2)(i)(A), (ii)(A).7 Reg. § 1.170A-6(c)(2)(i)(B), (ii)(B). 516