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mechanism that set the annual payout to the noncharitable income
beneficiaries as a fixed dollar amount (a CRAT) or fixed
percentage of the value of the trust assets (a CRUT), thereby
minimizing the incentive to skew investment strategy to favor the
noncharitable income beneficiaries.7 Estate of Gillespie v.
Commissioner, 75 T.C. 374, 376-378 (1980); H. Rept. 91-413 (Part
1), supra at 58-60, 1969-3 C.B. at 237-238; S. Rept. 91-552,
supra at 86-87, 1969-3 C.B. at 479.
To mitigate the reduction in amounts going to charity that
the imposition of this stringent framework could engender,
Congress provided a statutory mechanism in 1984 by which a trust
that failed to satisfy the CRAT, CRUT, or PIF regime of section
2055(e)(2)(A) might nonetheless be modified by means of a
"qualified reformation" so that a deduction under section 2055(a)
would be allowed. Sec. 2055(e)(3)(A).8 A "qualified
7 The third option Congress provided, a PIF, is an
irrevocable trust in which the property of the trust is managed
by the charitable organization to which the remainder interest is
contributed and for which the donor retains an income interest
for the life of one or more beneficiaries. Sec. 642(c)(5).
Since the assets in a PIF are managed by a charitable
organization, the incentive to favor the noncharitable income
beneficiaries is presumed eliminated.
8 Sec. 2055(e)(3), enacted by the Deficit Reduction Act of
1984, Pub. L. 98-369, sec. 1022(a), 98 Stat. 1026, was a
permanent rule to replace various temporary reformation
provisions that preceded it and is effective for reformations
made after Dec. 31, 1978.
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