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§ 12.3 CHARITABLE REMAINDER UNITRUST RULESestate, is a permissible triggering event. 160 Examples of impermissible triggeringevents include the sale of marketable assets and a request from the unitrustamount beneficiary or that recipient’s financial advisor that the CRUT’s payoutmechanism be converted to the fixed percentage method.The conversion to the fixed percentage method must occur at the beginningof the tax year that immediately follows the tax year in which the triggering dateor event occurs. 161 Any make-up amount is forfeited when the trust converts tothe fixed percentage method.The term unmarketable assets means assets other than cash, cash equivalents,or assets that can be readily sold or exchanged for cash or cash equivalents.Unmarketable assets include real property, closely held stock, and unregisteredsecurities for which there is no available exemption under the securities lawspermitting public sale. 162Thus, when these rules are satisfied, a donor can fund a CRUT with unmarketableassets that produce little or no income. The donor likely wants theincome beneficiary or beneficiaries of the CRUT to receive a steady stream ofpayments based on the total return available from the value of the assets. Ofcourse, these payments cannot be made until the unmarketable assets can beconverted into liquid (marketable) assets that can be used to generate income topay the fixed percentage amount.Using these FLIPCRUT rules, a donor can establish a CRUT that uses one ofthe two income-exception methods in calculating the unitrust amount until theunmarketable assets are sold. Following the sale, the CRUT’s payout method isaltered so that the fixed percentage method can be used to calculate the unitrustamount. Thus, the permissible FLIPCRUT patterns are a NICRUT flipped to aSCRUT or a NIMCRUT flipped to a SCRUT.Other Requirements. The governing instrument of a CRUT must provide that ifthe net fair market value of the trust assets is incorrectly determined by the fiduciary,the trust must pay to the income beneficiary (in the case of an undervaluation)or be repaid by the income beneficiary (in the case of an overvaluation) an amountequal to the difference between the amount the trust should have paid the incomebeneficiary if the correct value had been used and the amount that the trust initiallypaid the income beneficiary. These payments or repayments must be made within areasonable period after the final determination of the value. Any payment due to anincome beneficiary by reason of an incorrect valuation must be considered to be apayment required to be distributed at the time of the final determination for purposesof the year-of-inclusion rules. 163In computing the net fair market value of the trust assets, all assets and liabilitiesmust be taken into account without regard to whether particular itemsare taken into account in determining the income of the trust. The net fair marketvalue of the trust assets may be determined on any one date during the tax yearof the trust, or by taking the average of valuations made on more than one date160 Id.161 Reg. § 1.664-3(a)(1)(i)(c)(2).162 Reg. § 1.664-1(a)(7)(ii).163 Reg. § 1.664-3(a)(1)(iii). The year-of-inclusion rules are the subject of text accompanied by note 325. 431