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IRS Issues Guidance To Distinguish Between Real, and Sham, Trusts
IRS Publication 2193 aims to put all on notice of the kinds of trusts which not only will fail to produce the advertised benefits but also may subject taxpayers to civil and criminal penalties.
According to the IRS, taxpayers must be on guard for sham trusts that are disguised with such labels as business trusts, equipment or service trusts and family residence trusts.
Furthermore, the IRS cites these common misrepresentations:
Trusts eliminate or reduce income taxes or self-employment taxes;
Taxpayers will retain complete control over income and assets held in a trust;
Taxpayers may deduct personal expenses paid by a trust; and
Taxpayers can claim depreciation deductions for their personal residence and furnishings if they assign them to a trust.
Source: Investment News, March 6, 2000
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