Sidebar to May 28, 2000 Tax Prophet Column

How To Spot An Illegal Abusive Trust Arrangement

        1. Using trust names such as: "Pure Trust," Pure Equity Trust," "Common-Law Trust," "Constitutional Trust," and "Unincorporated Business Organization."

        2. Appeals to religious, constitutional or anti-government themes contained on the first page of the trust document.

        3. Calling the taxpayer the "Creator" the promoter the "Acceptor" and making references as to the right to contract under the Constitution.

        4. Providing the taxpayer with trust certificates or units of beneficial ownership in connection with the trust’s creation.

        5. Electing or appointing the taxpayer as a trustee trust manager.

        6. Creating multiple trusts with essentially the same creators, trustees and units of beneficial interest holders.

        7. Transferring assets to the trust without reporting income or gifts taxes on the transactions.

        8. Placing the taxpayer’s residence in a separate trust and then using the residence as trust "headquarters." The residence trust then deducts the taxpayer’s personal expenses for food, clothing, education and medical expenses as caretaker expenses.

        9. Advising the taxpayer not to rely on their attorney or accountant because these people were trained in "statutory" law and do not understand "pure" trust law.

        10. Using the phrase "with all rights reserved" or similar language in connection with signatures to indicate that those signing are not subject to IRS jurisdiction.