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§ 9.22 CONTRIBUTIONS BY TRUSTSWhen a charitable interest is in the form of a guaranteed annuity interest, thegoverning instrument of the trust may provide that income of the trust, which isin excess of the amount required to pay the guaranteed annuity interest, may bepaid to or for the use of a charitable organization. Nevertheless, the amount ofthe charitable deduction is limited to the fair market value of the guaranteedannuity interest. 523If the present value on the date of transfer of all the income interests for acharitable purpose exceeds 60 percent of the aggregate fair market value of allamounts in the trust (after the payment of liabilities), the income interest will notbe considered a guaranteed annuity interest unless the governing instrument ofthe trust prohibits both the acquisition and the retention of assets that wouldgive rise to the private foundation tax on jeopardizing investments 524 if thetrustee had acquired assets of that nature. 525An income interest consisting of an annuity transferred in trust is not a guaranteedannuity interest if any amount other than an amount in payment of aguaranteed annuity interest may be paid by the trust for a private purposebefore the expiration of all the income interests for a charitable purpose, unlessthe amount for a private purpose is paid from a group of assets that, pursuant tothe governing instrument of the trust, are devoted exclusively to private purposesand to which the split-interest trust rules 526 are inapplicable by reason ofan exception to them. 527 This exception applies only if the obligation to pay theannuity for a charitable purpose begins as of the date of creation of the trust, andthe obligation to pay the guaranteed annuity for a private purpose does not precedein time the obligation to pay the annuity for a charitable purpose, and onlyif the governing instrument of the trust does not provide for any preference orpriority in respect of any payment of the guaranteed annuity for a private purposeas opposed to any payment for a charitable purpose. In this context, anamount is not paid for a private purpose if it is paid for an “adequate and fullconsideration” in money or money’s worth. 528EXAMPLE 9.19E transfers $75,000 in trust. The terms of the trust require that an annuity of $5,000 a year,payable annually at the end of each year, be paid to B, an individual, for 5 years and thatthereafter an annuity of $5,000 a year, payable annually at the end of each year, be paid toM, a charitable organization, for 5 years. The remainder is to be paid to C, an individual. Acharitable deduction is not allowed under these rules with respect to the charitable annuity,because it is not a guaranteed annuity interest. aaId.523 Reg. § 1.170A-6(c)(2)(i)(C).524 IRC § 4944. See Private Foundations ch. 8.525 Reg. § 1.170A-6(c)(2)(i)(D).526 IRC § 4947(a)(2). See § 5.3; see also Private Foundations § 3.7.527 This exception is the subject of IRC § 4947(a)(2)(B).528 Reg. § 1.170A-6(c)(2)(i)(E). 339