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Posted by cballard@tyyni.net on October 11, 2007, 12:41 am
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> jba wrote:
>> Thanks again. What I want to accomplish is to make the
>> bypass trust a grantor trust. There are substantial income
>> and estate tax advantages. I'm still not convinced it isn't
>> already--i.e. that the beneficiary could be the "owner" for
>> income tax purposes under 674, 675, etc.
> It's pretty easy to set it up. Just allow the
> trustee/beneficiary to distribute the property to himself at
> any time. It will be considered a completed gift to that
> person, even if it remains in trust. But if you do that,
> why even bother using a trust?
>
> But I still don't understand why. As far as income tax is
> concerned, the B trust generally distributes all its income
> to the surviving spouse anyway. The trust gets a deduction
> for the distributions, and the surviving spouse is taxed on
> all the income. So it works out the same both ways.
I'm not sure, but I think the OP is looking for a way to
transfer huband's low basis assets into the trust in
exchange for the trust's high basis assets, without
triggering a tax on the exchange. If the trust is treated
as the husband's grantor trust, then the exchange of the
property would be seen as a non-event from an income tax
perspective.
--Chris
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