I'm leaving out a lot of information to try and make this brief, but hope I get in all the relevant facts.
Closely held S corp set up qualified S-type trusts by having its owner donate 31% of his outstanding stock to these trusts with his two children as beneficiaries. This happened in 2007 and I filed split gift tax returns for the parents. The two trusts are "grantor" trusts and so long as they pass through the "accounting income" the two children are treated as receiving dividends directly. I have been filing personal returns for all parties and the corp's accounting firm has been filing the 1120-S and all appertaining K-1s, 1041's etc.
Along comes 2011. Owner and wife (who also owns stock) have been having marital difficulties. Wife decides to go out and hire an independent financial planner, but wants to continue to use me to file personal returns. Wife, holding 28% of the stock, creates yet ANOTHER grantor trust for each child (2 total), by donating some 3% of it and selling another 10% of her shares to the trusts. Sale has one installment, due 48 months from inception.
This new financial planner elects not to file an SS-4 because as a grantor trust, claims the trust is a "disregarded entity." New planner also gives these new trusts the exact same name as the two trusts that were established in 2007.
My question is this: If another gift and related sale was desired, why was it necessary to establish two more trusts? Could not the same results be achieved by using the existing trusts already in existence since 2007?
I have withdrawn from this customer and the children after some 30 years of service and excellent relations. They have one CPA doing their corporate return, one EA doing their personal return (me), and TWO different financial planners doing their forward planning.
Closely held S corp set up qualified S-type trusts by having its owner donate 31% of his outstanding stock to these trusts with his two children as beneficiaries. This happened in 2007 and I filed split gift tax returns for the parents. The two trusts are "grantor" trusts and so long as they pass through the "accounting income" the two children are treated as receiving dividends directly. I have been filing personal returns for all parties and the corp's accounting firm has been filing the 1120-S and all appertaining K-1s, 1041's etc.
Along comes 2011. Owner and wife (who also owns stock) have been having marital difficulties. Wife decides to go out and hire an independent financial planner, but wants to continue to use me to file personal returns. Wife, holding 28% of the stock, creates yet ANOTHER grantor trust for each child (2 total), by donating some 3% of it and selling another 10% of her shares to the trusts. Sale has one installment, due 48 months from inception.
This new financial planner elects not to file an SS-4 because as a grantor trust, claims the trust is a "disregarded entity." New planner also gives these new trusts the exact same name as the two trusts that were established in 2007.
My question is this: If another gift and related sale was desired, why was it necessary to establish two more trusts? Could not the same results be achieved by using the existing trusts already in existence since 2007?
I have withdrawn from this customer and the children after some 30 years of service and excellent relations. They have one CPA doing their corporate return, one EA doing their personal return (me), and TWO different financial planners doing their forward planning.
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