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The IRS on Trusts
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| The IRS on Trusts | | |||||||||||||
By: | | IRS | | ||||||||||||
Date: | | 05/09/2000 | | ||||||||||||
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Too Good To Be True? - Should Your Financial Portfolio Include "Trusts"? "Taxes are what we pay for a civilized society" -Oliver Wendell Holmes There have always been groups and/or individuals who, for a variety of reasons, have tried to circumvent the tax system. And there have always been groups and/or individuals who have made legitimate efforts to seek reform of our tax system and to simplify our tax laws. But those who participate in or encourage taxpayers to structure transactions, specifically for the purpose of evading taxes, are engaging in criminal activity. Following false, misleading, or unorthodox tax advice is seldom free. Upfront you pay fees or commissions to subscribe to fraudulent trust schemes and in the end, unfortunately, you pay even more in penalties, interest, and fines for following bad advice. Knowingly participating in fraudulent trust arrangements has led to the incarceration and/or financial ruin of many taxpayers. See criminal cases United States v. Scott and United States v. Noske for what the Federal courts really say about fraudulent trusts. (Internet site -www. findlaw.com) The bottom line is Don't Buy In! Recognizing a problem trust. Taxpayers should look for the following common warning signs that may reveal an unscrupulous trust promotion: A promise to reduce or eliminate income and self-employment tax. Deductions for personal expenses paid by the trust. Depreciation deductions on an owner?s personal residence and furnishings. High fees for trust packages, to be offset by promised tax benefits. Use of back-dated documents. Unjustified replacement of trustee. Lack of an independent trustee. Use of post office boxes for trust addresses. Use of terms such as pure trust, constitutional trust, sovereign trust or unincorporated business organization. The IRS takes fraudulent trust arrangements seriously. It is a matter of maintaining public confidence in the fairness of the tax laws. Recommending prosecution of those who violate the tax laws demonstrates the IRS' commitment to ensuring all taxpayers pay their fair share of taxes. A trust is a form of ownership which completely separates responsibility and control of assets from all the benefits of ownership. Trusts are used in such matters as estate planning; to facilitate the genuine charitable transfer of assets; and to hold assets for minors and those unable to handle their financial affairs. All trusts must comply with the tax laws as set forth by the Congress in the Internal Revenue Code, Sections 641-683. | | | ||||||||
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