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IRS ISSUES PUBLICATION ON FRAUDULENT TRUSTS

June 24, 2004

The IRS has just released Publication 2193, "Should Your Financial Portfolio Include Too Good to Be True Trusts?" (pdf format link) The publication warns against trusts promising to reduce or eliminate your taxes while leaving you with use of the trust funds.

The publication has warning signs of bad trusts:

   -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.

There are additional indicators of bad trusts that the publication omits:

   -The trustee insists the trust be funded
   only with small-denomination unmarked bills.
   -The trust promoter will only meet you in
   remote wooded settings.
   -You can only enter the trustee's office if
   you know the current password.
   -The trustee's tax attorney produces a tax
   opinion consisting entirely of the word 
   "whatever."
   -The trustee wears on orange jumpsuit.
   -The trustee will waive his fee if you help him
   reclaim the $23 million dollars in the Royal 
   Bank of Nigeria left by his late deposed 
   father.

Remember, you heard it here first.

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