Charitable Remainder Trust (CRT) is one of the best and most complex tools in your arsenal as a high-income earner. It gives you the opportunity to put off capital gains, get a charitable deduction, and gain a lifetime stream of income.

Nevertheless, the IRS has stepped up its attention in the 2026 tax environment around the types of tax avoidance known as Listed Transactions, which must be disclosed. Careful to note, should your CRT be organized aggressively, you might be involved in a saleable transaction that is punishable by hefty fines that might be considered as reportable.

What is a "Listed Transaction" in the eyes of the IRS?

A listed transaction refers to a scheme that the IRS has characterized as abusive. Taxpayers and their material advisors are required to report their involvement in a transaction once it has been listed through Form 8886. Experienced IRS tax experts (former IRS tax agents, former auditors, and experienced sales tax audit lawyers) who can help with the listed transactions.

Lack of doing so may lead to daunting fines, in most cases up to 75 percent of the tax credit, irrespective of the accuracy of the tax return itself. In the case of CRTs, the taxman is especially sensitive to those variations that are substantially similar to the strategies employed by eliminating tax on the sale of appreciated assets.

How does the "Annuity and SPIA" pairing trigger an audit?

A single premise under a Charitable Remainder Annuity Trust (CRAT), which includes the application of a Single Premium Immediate Annuity (SPIA), is one of the reasons why a CRT can be viewed as a listed transaction.

In this case, a donor contributes to a CRAT using assets of high value, which are sold by the trust. The trust then purchases an SPIA by using the proceeds. The taxpayer asserts that the distributions do not qualify under Section 664(b) ordering rules as taxable income but as tax-free returns of investment under Section 72.

This is specifically what the IRS is aiming at as a tax avoidance strategy that will get around the 10-percent remainder.

Can the sale of a CRT interest be a "Transaction of Interest"?

In the IRS, transactions where a grantor and a charity are organizing to sell their respective interest in a CRT to a third party will be monitored in the name of the issuance of a Notice 2008-99. If one is running a sole proprietorship, then in that case, one might get a payroll tax audit, and here the attorneys can come to the rescue.

Should you donate appreciated stock, which is sold (tax freely) by the trust, then you are apt to sell what is left of your income interest to cash out with a stepped-up basis; you have entered a "Transaction of Interest. Although such moves are not illegal at all times, these are the forerunners of being listed and high-probability audit triggers in 2026.

Does your CRT meet the 10% and 5% statutory tests?

The way not to be branded an abusive shelter is to ensure that your trust complies strictly with the mechanical rules of Section 664. This includes:

The 5 percent Rule: Annual dividend should be between 5 and 50 percent of the incoming value.

The 10% Remainder Test: With this type of test, an actuary will be required to demonstrate that the charity will get at least 10% of the original fair market value of the property.

This is an actuarial valuation that is re-run on a periodic basis in 2026 by the IRS on filed returns using AI. A single, minor possibility of a foot-fault in the calculation is enough to invalidate the tax-exempt status of the trust.

Conclusion

Charitable Remainder Trust is a viable and efficient philanthropic and wealth-preserving tool. But such funky entries as SPIA pairings, or coordinated sale of interests, can soon make a valid plan one that becomes listed.

To secure your resources, make certain your CRT takes the "vanilla" route of Section 664 and is backed by an effective legal opinion to block you out of the combative disclosure fines of the 2026 enforcement interval.