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§ 12.2 CHARITABLE REMAINDER ANNUITY TRUST RULESdetermined for federal tax purposes. 69 A trust will not fail to meet the minimumannuity amount requirement, however, merely because it allows for a reductionof the stated amount payable upon the death of an income beneficiary or theexpiration of a term of years, provided that:• a distribution is made to a charitable organization at the death of therecipient or the expiration of a term of years, and• the total amounts payable each year after the distribution are not less thana stated dollar amount that bears the same ratio to 5 percent of the initialnet fair market value of the trust assets as the net fair market value of thetrust assets immediately after the distribution bears to the net fair marketvalue of the trust assets immediately before the distribution. 70If the grantor of an inter vivos trust underestimates in good faith the initialnet fair market value of the property placed in trust as finally determined forfederal tax purposes, and specifies a fixed dollar amount for the annuity that isless than 5 percent of the initial net fair market value of the property placed intrust as initially determined for federal tax purposes, the trust is deemed to havemet the 5 percent requirement if the grantor (or his or her representative) consents,by appropriate agreement with the IRS, to accept an amount equal to 20times the annuity as the fair market value of the property placed in trust for purposesof determining the appropriate charitable contribution deduction. 71(c) Maximum Annuity AmountA trust cannot qualify as a CRAT if the annuity for a year is greater than 50 percentof the initial net fair market value of the trust’s assets. 72This rule was added to the law out of concern that the interplay between therules governing the timing of income from distributions out of CRTs 73 and therules governing the character of distributions 74 had created opportunities forabuse when the required annual payments are a large portion of the trust andrealization of income and gain can be postponed until a year later than theaccrual of the large payments. 75 The example commonly given of this abuse wasin the context of CRUTs and is discussed in that setting. 7669 IRC § 664(d)(1)(A); Reg. § 1.664-2(a)(2)(i). In one instance, a trust, intended to be a CRAT, failed to makeany payments to the income beneficiary during that individual’s lifetime; the Tax Court concluded that “operationally”the trust did not meet the payout requirement and thus could not qualify as a CRT. Atkinson Estatev. Commissioner, 115 T.C. 26, 32 (2000). The representative of the estate asked the court to “set aside or ignore[]”the distribution requirement, because the individual had no need for the income! Id. at 31. The court,of course, lacked the authority to grant that request.70 Reg. § 1.664-2(a)(2)(ii).71 Reg. § 1.664-2(a)(2)(iii).72 IRC § 664(d)(1)(A).73 See text accompanied by note 322.74 See § 12.5.75 S. Rep. No. 105-33, 105th Cong., 1st Sess. (1997).76 See § 12.3(c). This change in the law was not intended to alter rules in subsequently adopted tax regulationsaddressing the same point. See § 12.4(g). 419