The IRS on Trusts
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.
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
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
All trusts must comply with the tax laws
as set forth by the Congress in the Internal
Revenue Code, Sections 641-683.