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§ 12.4 ISSUESgratuitously and could be revoked at any time. Also, the charitable organizationwould not have been provided any guarantee or promise as to the amountof the corpus in the trust, so it would not have any basis for reliance that wouldstop the donor from revoking it. Thus, the IRS wrote, whether the option wouldbecome enforceable would depend upon “hypothetical and somewhat speculativefuture events,” making it clear that the option would not be enforceable atthe time it was transferred to the trust. Again, the IRS concluded that the transferof the option to the trust would not be a completed gift and consequentlycould not give rise to a charitable deduction.The IRS maintained that the sale of the option by the trustee to a third partywould not be treated as completing the donor’s gift to the trust, assuming the saledid not render the option enforceable at that time. A subsequent sale of the realestate by the donor to a third-party assignee at the option price might, the IRS conjectured,be viewed as a gift (in the form of a bargain sale) 248 from the donor to theassignee on the date of sale. If the third-party assignee were a charitable organization,the gift could qualify for a gift tax charitable deduction. In this situation, thegift would be considered to be made to the third-party charity outside the trust.Accordingly, the transfer would not constitute a transfer to the trust for which agift tax charitable contribution would be allowable with respect to the trust.Because neither charitable contribution deduction would be allowable, theIRS concluded that the trust could not be a CRT in every respect and could notfunction exclusively as a CRT from its inception. Thus, upon transfer of theoption to the trust, it would cease to qualify as a CRT under the federal tax law.Presumably, therefore, the proposed transfer of the option did not take place. 249(b) Right to Change Charities or TrusteesThe IRS ruled that the power in grantors to CRTs to change the flow of remainderinterests to charitable organizations, or to alter the nature of the trusteeship,does not adversely affect the federal tax status of the trusts. 250In the case, the grantors were the sole recipients of the income interest payments(unitrust amounts). These payments were to be made to the grantors inequal shares for their joint lives and thereafter to the survivor of the two for his orher life. The charitable organizations that were to receive the remainder interestwere listed in the trust agreement. The grantors, however, retained the right tomodify, amend, or revoke these remainder interest designations and substitutenew ones or change the proportions to be received by each charitable organization.Moreover, the grantors elected to serve as the initial trustees of the trust. Thetrust agreement provided that, upon the resignation of a trustee, a successortrustee could be appointed by either or both of the grantors, depending on circumstancesprescribed in the agreement. If there was no appointment, the couple’schild was to serve as successor trustee.248 See § 9.19.249 As to the issue for which the ruling was sought, the IRS ruled that the donor would be treated as the owner ofthe trust’s assets for federal income tax purposes, so that the donor’s taxable income would include the trust’sitems of income, including any gain the trust realized on transfer of the option to a third party.250 Priv. Ltr. Rul. 9504012. 445