Trust Fraud Issues to be aware of
•Descargar como PPTX, PDF•
1 recomendación•735 vistas
These are original documents we\'ve been developing over the past year to educate Realtors, US Investors, Foreign Investors, distressed home owners and Retiring Baby Boomers
Recomendados
Recomendados
Más contenido relacionado
Destacado
Destacado (18)
Más de Michael Belgeri
Más de Michael Belgeri (19)
Trust Fraud Issues to be aware of
- 1. Trusts ,Trust Fraud, and Taxes: A Risk Management Guide A Business Intelligence Report By Celtic Wind Investment Presented by: Nicola Chin and Michael Belgeri
- 3. 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.
Notas del editor
- Historically a Trust structure has never existed to avoid taxes. They were created to preserve ownership and protect the property. If someone tells you otherwise, its too good to be true. The IRS has recently undertaken a national coordinated strategy to address fraudulent trust schemes. We support that effort with this presentation concerning legitimate trusts. This segment will cover a number of Trust Frauds uncovered by IRS investigators in recent years. Let’s begin with a few rules of thumb.
- There is always a mystery involved in un-explored territory and the unscrupulous will take advantage of the mystery, particularly when it involves a strategy to lower, or eliminate taxes. Corporations and the wealthy have always had trusts in their asset planning either at the recommendation of their attorney or their accountant. For the corporation the use of Trusts to hold property is more than often a protection against liability. For the wealthy the use of trusts has tended to be for philanthropic purposes. In both case some tax benefits may accrue. The ‘trickle down’ effect of trust use to the small investor and to residential home owners has only come about as a value for Florida property owners since the state legislature made certain modifications to Florida’s Land Trust Act. The most recent of which was in 2008 when they removed liability for property ownership from the beneficial interest holder.For most Florida home owners, retiring Americans, Canadians, and small investors the effective use of a Florida Land Trust structure to hold either a personal residence or an investment empire is out of the mainstream of their experience. From our review of a new IRS initiative against Trust Fraud Schemes, the legitimate use of any Trust structure faces challenges because the distressed home owner, and opportunistic property speculator is being seen as an easy target by the unscrupulous financial criminal element. So let’s take a look at the more likely issues of Trust Fraud they have uncovered.
- Here are the IRS Rules of thumb:You know its too good to be true if the trust is going to reduce or eliminate income or self employment taxesYou know its too good to be true if you are taking deducts for personal expenses paid by the trustYou know its too good to be true if you are promised depreciation deductions on your personal residence and furnishings.You know its too good to be true if you are charged high fees for the Trust package and told that the tax benefits are worth it.You know its too good to be true if your documents are backdated, you have back dated documents, you dump you trustee for no good reason or you have a post office box instead of a street address for your Trust.Finally you know its too good to be true if you are told it is a ‘pure trust”, a constitutional trust, a sovereign trust or an unincorporated business organization. Here are a few of the Illegitimate schemes you should be familiar with…
- There is always an element of Truth in a Fraud, otherwise it wouldn’t be Fraud. This fraud involves the transfer of an on going business to a trust. Also called an unincorporated business organization, a pure trust or a constitutional trust, it makes it appear that the taxpayer has given up control of his or her business.In reality, however, through trustees or other entities controlled by the taxpayer, he or she stillruns day-to-day activities and controls the business’ stream of income. Such arrangements provideno tax relief.
- Equipment or Service Trust: This trust is formed to hold equipment that is rented or leased to the business trust, often at inflated rates. The business trust reduces its income by claiming deductions for payments to the equipment trust. This type of arrangement has the same pitfalls as the business trust. It provides no tax relief.
- Charitable Trust Fraud: Taxpayers transfer assets or income to a trust claiming to be a charitable organization. The trust or organization pays for personal, educational, and recreational expenses on behalf of the taxpayer or family member. The trust then claims the payments as charitable deductions on its tax returns. These alleged charitable organizations often are not qualified and have no IRS exemption letter. Therefore, contributions are not deductible and the homeowner is facing a significant tax bill while the “designer of the Fraud” has disappeared.
- Foreign Trust: These trusts often are located in foreign countries that impose little or no tax on trusts and also provide financial secrecy. Typically, abusive foreign trust arrangements enable taxable funds to flow through several trusts or entities until the funds are ultimately distributed or made available to the original owner. The trust promoter claims that this distribution is tax-free. In fact, the income from these arrangements is fully taxable. Remember the United States has ‘Tax Treaties’ with more than 79 countries. Even expatriate Americans living in Treaty countries are not out of reach of the IRS.
- Taxpayers transfer family residences, including furnishings, to a trust, which sometimes rents the residence back to the taxpayer. The trust deducts depreciation and the expenses of maintaining and operating the residence including, pool service and utilities. These expenses are not deductible and the IRS will disallow them. This is not to be confused with a Land Trust either at the Federal level, state or personal level.The Federal Government holds 56 million acres of land in trust for the American Indian Tribes and in those lands there are no government taxes. Counties in Florida often create land trusts to manage their public housing and Federal taxes are not relevant.
- The IRS tolerates Land Trusts which are defined by State Statute. One reason is that the largest Land Trust Holder is the Federal Government itself. The IRS recognizes state’s rights to create Land Trust Law as long as the state understands that Land Trusts are taxable organizations under IRS Codes. The earliest of the modern day Land Trust Law evolved from Illinois court rulings starting around 1850 when the railroads needed right’s of way and finally turned into a state law 1891. Today 49 States of some semblance of a Land Trust Law. Only Tennessee and Louisiana have no Land Trust Law at all.In Illinois, and in five other states, the legislation that was enacted creates a unique form, a special type of trust, commonly referred to by the IRS as an "Illinois Land Trust". These trusts are designed to house real estate within a grantor revocable trust and provide limited access to grantor or beneficiary. Information contained in the trust instrument and known to the trustee is considered private and kept off the public record. A Florida 1968 revision qualified the privacy with a single exception-- a RICO lean search is required during the establishment of Title lineage.Once a land trust is established, the ability to trace property financial transactions becomes limited, as state law establishes the power of the trustee not to disclose the true owner of the property or those with a beneficial interest. The "land trust" has no special distinction in the Internal Revenue Code and would be a simple, complex, or grantor trust depending on the terms of the trust instrument. In Florida the “Land Trust” can be owned by or held in trusteeship by either a person or a business entity like an LLC.