TLH with trusts and individual accounts: pitfalls?

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willardx
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TLH with trusts and individual accounts: pitfalls?

Post by willardx » Wed Mar 25, 2020 1:08 pm

Yes, it's another tax loss harvesting question. I've read the wiki on it and searched BH for posts that might answer my questions, this is mostly for confirmation of what I'm trying to accomplish. First, some questions:

1. Irrevocable trusts that file separate tax returns (i.e. has its own EIN) can TLH, correct?

2. As a separate tax entity, any TLH done by the trust won't impact any TLH by the trustee under her own personal accounts, correct?

2a. Can trustee of one trust TLH with identical mutual funds in a separate trust, as trustee to both? Each trust files its own separate returns.

3. The wash sale rule only invalidates that specific portion of the TLH attempt, correct?

Here's our scenario: Trust A has mostly long-term capital losses in VEMAX (Emerging Markets), along with mostly long-term capital gains in VSGAX (Small Cap Growth) in a taxable account. The losses are greater than the gains. To simplify the portfolio, I want to sell both funds and use all proceeds to buy VTSAX (Total Stock Market). As of March 23, 2020, market prices, there would be a net carryover loss of $20,827 of LT losses to use in future years.

Trust B has the same VEMAX fund and VINEX (International Explorer) with mostly long-term losses, and VDADX (Dividend Appreciation) with long-term gains, but with more losses than gains. I would want to do the same thing and sell both funds and put all proceeds into VTSAX. (I may keep VINEX for international exposure, but I would prefer to jettison it for the sake of simplicity.) As of March 23, 2020, market prices, there would be $29,756 of LT losses.

Each trust has received VEMAX dividends and bought more VEMAX on March 20, 2020, but less than $550 per trust. I turned off automatic reinvestments in VEMAX, the other funds didn't have this problem. I can wait until April 21 or April 22 to execute this, but if it's only a small percentage that will be considered a wash, I'd rather just do it now.

We have a joint taxable account with some TLH opportunities, and I'd like to simplify it as well with VTSAX. But higher priority goes to Trusts A and B, if there's a prohibition. I could find other funds too, we have S&P500 funds also, and I would be okay using that fund if necessary.

Any insights appreciated.

rkhusky
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Re: TLH with trusts and individual accounts: pitfalls?

Post by rkhusky » Wed Mar 25, 2020 5:12 pm

willardx wrote:
Wed Mar 25, 2020 1:08 pm
Yes, it's another tax loss harvesting question. I've read the wiki on it and searched BH for posts that might answer my questions, this is mostly for confirmation of what I'm trying to accomplish. First, some questions:

1. Irrevocable trusts that file separate tax returns (i.e. has its own EIN) can TLH, correct?

2. As a separate tax entity, any TLH done by the trust won't impact any TLH by the trustee under her own personal accounts, correct?

2a. Can trustee of one trust TLH with identical mutual funds in a separate trust, as trustee to both? Each trust files its own separate returns.

3. The wash sale rule only invalidates that specific portion of the TLH attempt, correct?
1. Yes.

2. No. If you or your spouse are a trustee on the trust, and you or your spouse are a beneficiary on the trust, then wash sales are possible. The tax court ruled a long time ago that trusts are not exempt from wash sale rules.

2a. You can TLH, but you may cause wash sales.

3. Wash sales work on a share by share basis. If you TLH 1000 shares and purchase 10 shares of a substantially identical investment within the 61-day wash sale window, then you are not able to deduct the loss on 10 shares of your 1000-share sale.

Gill
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Re: TLH with trusts and individual accounts: pitfalls?

Post by Gill » Wed Mar 25, 2020 6:27 pm

You’re stretching the wash sale rule way beyond reason and its intent. Being trustee of an irrevocable trust should have no connection to your personal investment transactions.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal

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willardx
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Re: TLH with trusts and individual accounts: pitfalls?

Post by willardx » Wed Mar 25, 2020 7:16 pm

rkhusky wrote:
Wed Mar 25, 2020 5:12 pm

2. No. If you or your spouse are a trustee on the trust, and you or your spouse are a beneficiary on the trust, then wash sales are possible. The tax court ruled a long time ago that trusts are not exempt from wash sale rules.
After I posted, I began to wonder about the beneficiaries being a factor, thank you for bringing this up. I will do more research on this topic, and by the time I'm done, maybe there will be no losses to harvest!

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Re: TLH with trusts and individual accounts: pitfalls?

Post by rkhusky » Wed Mar 25, 2020 7:56 pm

Gill wrote:
Wed Mar 25, 2020 6:27 pm
You’re stretching the wash sale rule way beyond reason and its intent. Being trustee of an irrevocable trust should have no connection to your personal investment transactions.
Gill
Unless you are also the beneficiary of the trust.

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Re: TLH with trusts and individual accounts: pitfalls?

Post by Gill » Wed Mar 25, 2020 8:39 pm

rkhusky wrote:
Wed Mar 25, 2020 7:56 pm
Gill wrote:
Wed Mar 25, 2020 6:27 pm
You’re stretching the wash sale rule way beyond reason and its intent. Being trustee of an irrevocable trust should have no connection to your personal investment transactions.
Gill
Unless you are also the beneficiary of the trust.
Your response is inadequate. Are you implying sole beneficiary of the trust? How about 50% beneficiary? As I stated in another thread, this is being holier than the Pope.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal

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Re: TLH with trusts and individual accounts: pitfalls?

Post by rkhusky » Wed Mar 25, 2020 8:41 pm

Gill wrote:
Wed Mar 25, 2020 8:39 pm
rkhusky wrote:
Wed Mar 25, 2020 7:56 pm
Gill wrote:
Wed Mar 25, 2020 6:27 pm
You’re stretching the wash sale rule way beyond reason and its intent. Being trustee of an irrevocable trust should have no connection to your personal investment transactions.
Gill
Unless you are also the beneficiary of the trust.
Your response is inadequate. Are you implying sole beneficiary of the trust? How about 50% beneficiary? As I stated in another thread, this is being holier than the Pope.
Gill
OP didn't say. But if husband and wife are sole beneficiaries and either is trustee, then yes. If husband is trustee and wife is sole beneficiary, then yes. If OP is sole trustee and 50% beneficiary with brother, then yes.

If OP is 1 voting member of a 5 member trustee board with 10 beneficiaries, including OP, then probably not.

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Re: TLH with trusts and individual accounts: pitfalls?

Post by Gill » Wed Mar 25, 2020 8:47 pm

rkhusky wrote:
Wed Mar 25, 2020 8:41 pm
Gill wrote:
Wed Mar 25, 2020 8:39 pm
rkhusky wrote:
Wed Mar 25, 2020 7:56 pm
Gill wrote:
Wed Mar 25, 2020 6:27 pm
You’re stretching the wash sale rule way beyond reason and its intent. Being trustee of an irrevocable trust should have no connection to your personal investment transactions.
Gill
Unless you are also the beneficiary of the trust.
Your response is inadequate. Are you implying sole beneficiary of the trust? How about 50% beneficiary? As I stated in another thread, this is being holier than the Pope.
Gill
OP didn't say. But if husband and wife are sole beneficiaries and either is trustee, then yes. If husband is trustee and wife is sole beneficiary, then yes. If OP is sole trustee and 50% beneficiary with brother, then yes.

If OP is 1 voting member of a 5 member trustee board with 10 beneficiaries, including OP, then probably not.
Could you cite your authority for your theories? How are you defining a beneficiary? What about a beneficiary who has no interest in principal or only the possibility of principal being invaded for his benefits ? How about a five and five power? In my opinion, this is nonsense. I certainly wouldn’t prepare a 1040 or 1041 on this basis or advise a client.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal

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Re: TLH with trusts and individual accounts: pitfalls?

Post by rkhusky » Thu Mar 26, 2020 6:58 am

Gill wrote:
Wed Mar 25, 2020 8:47 pm
How are you defining a beneficiary?
A beneficiary who will receive the investments at some point that the trustee is trading within the account. If the trustee and the beneficiary are the same person or spouses, there is the possibility of wash sales.

It is analogous to an IRA. A husband can create transactions in his IRA that cause a wash sale in his wife's IRA and vice-versa.

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Re: TLH with trusts and individual accounts: pitfalls?

Post by Gill » Thu Mar 26, 2020 7:06 am

Rkhusky, where are you coming up with these theories? I have a bit of experience in this area and have never heard of much of what you’re saying. As requested before, how about some citations.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal

rkhusky
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Re: TLH with trusts and individual accounts: pitfalls?

Post by rkhusky » Thu Mar 26, 2020 7:13 am

Here you go:
https://www.irs.gov/pub/irs-drop/rr-08-05.pdf

"an individual retirement account is a tax-exempt trust"

"The difference between acquisition by him personally and acquisition by the trust amounts only to a refinement of title and may be disregarded so far as section 214(a)(5) is concerned"

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Re: TLH with trusts and individual accounts: pitfalls?

Post by rkhusky » Thu Mar 26, 2020 7:59 am

Below are a few examples, where I would say that a wash sale occurs. What is your opinion?

Trustee A sells $100K of VTSAX for a loss in a personal taxable account. Trustee A causes $100K of VTSAX to be purchased in the trust on the same day.


1) Trustee A is the sole trustee and the sole beneficiary of the trust.

2) Trustee A is the sole trustee of the trust. Trustee A's spouse is the sole beneficiary of the trust.

3) Trustee A and Trustee A's spouse are the sole co-trustees of the trust. Trustee A and Trustee A's spouse are the sole beneficiaries of the trust.

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Re: TLH with trusts and individual accounts: pitfalls?

Post by Gill » Thu Mar 26, 2020 10:35 am

You're really stretching these cases which appear to have no relation to what we're discussing. In the Security First case they spoke of the seller having "absolute dominion and control" and therefore I would be quite certain this was a revocable grantor trust. In that case I would certainly agree. You are extrapolating this to include irrevocable trusts where the taxpayer is a trustee or beneficiary and over which he does not have "dominion and control". The ruling you cited goes no where near that far.

In your three hypotheticals, who are the remaindermen?
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal

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Re: TLH with trusts and individual accounts: pitfalls?

Post by rkhusky » Thu Mar 26, 2020 2:26 pm

Gill wrote:
Thu Mar 26, 2020 10:35 am
You are extrapolating this to include irrevocable trusts where the taxpayer is a trustee or beneficiary ...
No, I am talking about cases where the taxpayer is both trustee and beneficiary.

If only a trustee or only a beneficiary, then no wash sale.

Gill wrote:
Thu Mar 26, 2020 10:35 am
In your three hypotheticals, who are the remaindermen?
The beneficiaries get everything in the trust, once the terms of the trust are met.

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Re: TLH with trusts and individual accounts: pitfalls?

Post by Gill » Thu Mar 26, 2020 2:36 pm

rkhusky wrote:
Thu Mar 26, 2020 2:26 pm
Gill wrote:
Thu Mar 26, 2020 10:35 am
You are extrapolating this to include irrevocable trusts where the taxpayer is a trustee or beneficiary ...
No, I am talking about cases where the taxpayer is both trustee and beneficiary.

If only a trustee or only a beneficiary, then no wash sale.

Gill wrote:
Thu Mar 26, 2020 10:35 am
In your three hypotheticals, who are the remaindermen?
The beneficiaries get everything in the trust, once the terms of the trust are met.
Just because an individual is both trustee and beneficiary doesn't mean he has complete dominion and control over the trust assets. Also, I have no idea what you mean by your description of a beneficiary above. Can we please discontinue this discussion? I can tell from your resposes you don't understand how this issue relates to irrevocable trusts. I've said enough.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal

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Re: TLH with trusts and individual accounts: pitfalls?

Post by rkhusky » Thu Mar 26, 2020 3:13 pm

Gill wrote:
Thu Mar 26, 2020 2:36 pm
rkhusky wrote:
Thu Mar 26, 2020 2:26 pm
Gill wrote:
Thu Mar 26, 2020 10:35 am
You are extrapolating this to include irrevocable trusts where the taxpayer is a trustee or beneficiary ...
No, I am talking about cases where the taxpayer is both trustee and beneficiary.

If only a trustee or only a beneficiary, then no wash sale.

Gill wrote:
Thu Mar 26, 2020 10:35 am
In your three hypotheticals, who are the remaindermen?
The beneficiaries get everything in the trust, once the terms of the trust are met.
Just because an individual is both trustee and beneficiary doesn't mean he has complete dominion and control over the trust assets. Also, I have no idea what you mean by your description of a beneficiary above. Can we please discontinue this discussion? I can tell from your resposes you don't understand how this issue relates to irrevocable trusts. I've said enough.
Gill
Sure. Trusts can be set up many different ways and for many different purposes. I can only speak to the ones I have seen.

edit: Primarily speaking of irrevocable trusts where the trustee disperses the net proceeds of the trust to the beneficiaries on the death of the grantor.

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Re: TLH with trusts and individual accounts: pitfalls?

Post by Gill » Thu Mar 26, 2020 5:49 pm

rkhusky wrote:
Thu Mar 26, 2020 3:13 pm

edit: Primarily speaking of irrevocable trusts where the trustee disperses the net proceeds of the trust to the beneficiaries on the death of the grantor.
Now I understand the extent of your experience which is with terminating grantor trusts. Those are only a very small segment of irrevocable trusts, many of which continue on for generations. I assure you the wash sale rule does not apply to most if any of those trusts.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal

rkhusky
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Re: TLH with trusts and individual accounts: pitfalls?

Post by rkhusky » Thu Mar 26, 2020 6:40 pm

Gill wrote:
Thu Mar 26, 2020 5:49 pm
rkhusky wrote:
Thu Mar 26, 2020 3:13 pm

edit: Primarily speaking of irrevocable trusts where the trustee disperses the net proceeds of the trust to the beneficiaries on the death of the grantor.
Now I understand the extent of your experience which is with terminating grantor trusts. Those are only a very small segment of irrevocable trusts, many of which continue on for generations. I assure you the wash sale rule does not apply to most if any of those trusts.
Gill
On the other hand, it still seems to me that if you have a sole trustee who is also the sole beneficiary, then you can run into wash sales. Say you have a multi-generational trust that such a trustee/beneficiary is managing. Granted that the intent is for the trust to pass to the heirs of the trustee/beneficiary at some point, but the trustee/beneficiary is deriving some benefit from the trust, or could if need be. I fail to see how this is much different than if the trust were instead a taxable account. The intent could still be that all the assets pass to the heirs. The owner could still take income from the trust if need be. Perhaps there are more limitations with the trust, but that depends on how the trust is set up. As the ruling previously mentioned alluded to, you can't hide behind the label of "trust" if there is no practical difference between it and a taxable account. If the trustee/beneficiary can withdraw as much money from the trust as they want, then there is no practical difference from a taxable account.

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Re: TLH with trusts and individual accounts: pitfalls?

Post by Gill » Thu Mar 26, 2020 6:48 pm

rkhusky wrote:
Thu Mar 26, 2020 6:40 pm
As the ruling previously mentioned alluded to, you can't hide behind the label of "trust" if there is no practical difference between it and a taxable account. If the trustee/beneficiary can withdraw as much money from the trust as they want, then there is no practical difference from a taxable account.
The ruling was addressing grantor trusts. If the beneficiary has the absolute right to withdraw principal it is treated as a grantor trust. This essentially is not a trust. We are not talking about this type of trust. Most irrevocable trusts are A in trust for B with remainder to C with trustee Having discretion to invade principal for B using an ascertainable standard. You don’t seem familiar with this type of trust.
Gill
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Re: TLH with trusts and individual accounts: pitfalls?

Post by willardx » Thu Mar 26, 2020 7:01 pm

I didn't realize this conversation was going on, I will study your posts more carefully later and try to clarify things, if that would help. For now, I will say that the current trustee was not the grantor for either trust. She is both trustee and one beneficiary among several for one trust, and solely trustee for the other trust (i.e. not also a beneficiary).

It seems to me the wash rule is a pretty minor consideration, and avoidable with some research of distinguishing features between funds to act as partners for the selling funds. My main goal is to lock in some losses to offset gains, those gains to be either this year or in the future. Having sold a large amount of funds last year for a different reason, and reinvesting last year the basis from those sale proceeds, I am sitting on a lot of both LT and ST losses that can be harvested with some planning. I appreciate your analysis of my situation, to the extent I am sharing details. I have notified my CPA firm of my idea to TLH but I would rather do the homework myself instead of letting them run free and charge me for their time, especially if it becomes a moot point.

Thanks again, and cheers! :sharebeer

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Re: TLH with trusts and individual accounts: pitfalls?

Post by rkhusky » Fri Mar 27, 2020 7:36 am

Gill wrote:
Thu Mar 26, 2020 6:48 pm
Most irrevocable trusts are A in trust for B with remainder to C with trustee Having discretion to invade principal for B using an ascertainable standard. You don’t seem familiar with this type of trust.
Only in passing. But that doesn't seem to be the same as A in trust for A with remainder to C. But I acknowledge that it depends on the constraints placed on A.

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Re: TLH with trusts and individual accounts: pitfalls?

Post by Gill » Fri Mar 27, 2020 8:08 am

rkhusky wrote:
Fri Mar 27, 2020 7:36 am
Gill wrote:
Thu Mar 26, 2020 6:48 pm
Most irrevocable trusts are A in trust for B with remainder to C with trustee Having discretion to invade principal for B using an ascertainable standard. You don’t seem familiar with this type of trust.
Only in passing. But that doesn't seem to be the same as A in trust for A with remainder to C. But I acknowledge that it depends on the constraints placed on A.
A in trust for A is a grantor trust.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal

rkhusky
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Re: TLH with trusts and individual accounts: pitfalls?

Post by rkhusky » Fri Mar 27, 2020 8:21 am

Gill wrote:
Fri Mar 27, 2020 8:08 am
rkhusky wrote:
Fri Mar 27, 2020 7:36 am
Gill wrote:
Thu Mar 26, 2020 6:48 pm
Most irrevocable trusts are A in trust for B with remainder to C with trustee Having discretion to invade principal for B using an ascertainable standard. You don’t seem familiar with this type of trust.
Only in passing. But that doesn't seem to be the same as A in trust for A with remainder to C. But I acknowledge that it depends on the constraints placed on A.
A in trust for A is a grantor trust.
Gill
OK. So, A in trust for B, who is also the trustee, with remainder to C.

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Re: TLH with trusts and individual accounts: pitfalls?

Post by Gill » Fri Mar 27, 2020 8:26 am

rkhusky wrote:
Fri Mar 27, 2020 8:21 am
Gill wrote:
Fri Mar 27, 2020 8:08 am
rkhusky wrote:
Fri Mar 27, 2020 7:36 am
Gill wrote:
Thu Mar 26, 2020 6:48 pm
Most irrevocable trusts are A in trust for B with remainder to C with trustee Having discretion to invade principal for B using an ascertainable standard. You don’t seem familiar with this type of trust.
Only in passing. But that doesn't seem to be the same as A in trust for A with remainder to C. But I acknowledge that it depends on the constraints placed on A.
A in trust for A is a grantor trust.
Gill
OK. So, A in trust for B, who is also the trustee, with remainder to C.
So B is only an income beneficiary with no interest in principal. Wouldn’t be subject to wash sale rule.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal

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Re: TLH with trusts and individual accounts: pitfalls?

Post by rkhusky » Fri Mar 27, 2020 8:41 am

Gill wrote:
Fri Mar 27, 2020 8:26 am
rkhusky wrote:
Fri Mar 27, 2020 8:21 am
Gill wrote:
Fri Mar 27, 2020 8:08 am
rkhusky wrote:
Fri Mar 27, 2020 7:36 am
Gill wrote:
Thu Mar 26, 2020 6:48 pm
Most irrevocable trusts are A in trust for B with remainder to C with trustee Having discretion to invade principal for B using an ascertainable standard. You don’t seem familiar with this type of trust.
Only in passing. But that doesn't seem to be the same as A in trust for A with remainder to C. But I acknowledge that it depends on the constraints placed on A.
A in trust for A is a grantor trust.
Gill
OK. So, A in trust for B, who is also the trustee, with remainder to C.
So B is only an income beneficiary with no interest in principal. Wouldn’t be subject to wash sale rule.
Gill
Could be, unless B's income depletes principal leaving nothing to C (e.g. B lives a lot longer than expected, B makes poor decisions on investments).

Then there is A in trust for B, who is also the trustee, with remainder to B.

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Re: TLH with trusts and individual accounts: pitfalls?

Post by Gill » Fri Mar 27, 2020 9:06 am

rkhusky wrote:
Fri Mar 27, 2020 8:41 am

Then there is A in trust for B, who is also the trustee, with remainder to B.
That’s novel. Give me a better example of the terms of that trust.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal

rkhusky
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Re: TLH with trusts and individual accounts: pitfalls?

Post by rkhusky » Fri Mar 27, 2020 9:56 am

Gill wrote:
Fri Mar 27, 2020 9:06 am
rkhusky wrote:
Fri Mar 27, 2020 8:41 am

Then there is A in trust for B, who is also the trustee, with remainder to B.
That’s novel. Give me a better example of the terms of that trust.
Gill
A puts funds into a trust for B, who is currently 20, which gives yearly income to B until B reaches the age of 40, at which point B can withdraw all of principal if desired.

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Re: TLH with trusts and individual accounts: pitfalls?

Post by Gill » Fri Mar 27, 2020 11:15 am

rkhusky wrote:
Fri Mar 27, 2020 9:56 am
Gill wrote:
Fri Mar 27, 2020 9:06 am
rkhusky wrote:
Fri Mar 27, 2020 8:41 am

Then there is A in trust for B, who is also the trustee, with remainder to B.
That’s novel. Give me a better example of the terms of that trust.
Gill
A puts funds into a trust for B, who is currently 20, which gives yearly income to B until B reaches the age of 40, at which point B can withdraw all of principal if desired.
There would be other contingent remaindermen who would take in the event B doesn’t attain age 40 so he has no vested interest in the principal until attaining age 40. Should not be subject to wash sale rule as it applies to B. You make me feel like I’m taking the bar exam again.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal

rkhusky
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Re: TLH with trusts and individual accounts: pitfalls?

Post by rkhusky » Fri Mar 27, 2020 11:26 am

Gill wrote:
Fri Mar 27, 2020 11:15 am
rkhusky wrote:
Fri Mar 27, 2020 9:56 am
Gill wrote:
Fri Mar 27, 2020 9:06 am
rkhusky wrote:
Fri Mar 27, 2020 8:41 am

Then there is A in trust for B, who is also the trustee, with remainder to B.
That’s novel. Give me a better example of the terms of that trust.
Gill
A puts funds into a trust for B, who is currently 20, which gives yearly income to B until B reaches the age of 40, at which point B can withdraw all of principal if desired.
There would be other contingent remaindermen who would take in the event B doesn’t attain age 40 so he has no vested interest in the principal until attaining age 40. Should not be subject to wash sale rule as it applies to B. You make me feel like I’m taking the bar exam again.
Gill
I disagree that B has no vested interest in the principal. But that’s all I got. Thanks for the discussion.

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Re: TLH with trusts and individual accounts: pitfalls?

Post by Gill » Fri Mar 27, 2020 11:45 am

rkhusky wrote:
Fri Mar 27, 2020 11:26 am
Gill wrote:
Fri Mar 27, 2020 11:15 am
rkhusky wrote:
Fri Mar 27, 2020 9:56 am
Gill wrote:
Fri Mar 27, 2020 9:06 am
rkhusky wrote:
Fri Mar 27, 2020 8:41 am

Then there is A in trust for B, who is also the trustee, with remainder to B.
That’s novel. Give me a better example of the terms of that trust.
Gill
A puts funds into a trust for B, who is currently 20, which gives yearly income to B until B reaches the age of 40, at which point B can withdraw all of principal if desired.
There would be other contingent remaindermen who would take in the event B doesn’t attain age 40 so he has no vested interest in the principal until attaining age 40. Should not be subject to wash sale rule as it applies to B. You make me feel like I’m taking the bar exam again.
Gill
I disagree that B has no vested interest in the principal. But that’s all I got. Thanks for the discussion.
It is not vested. It is contingent on him attaining age 40. Otherwise he loses it all. That is not a vested interest.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal

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Re: TLH with trusts and individual accounts: pitfalls?

Post by rkhusky » Fri Mar 27, 2020 1:52 pm

Gill wrote:
Fri Mar 27, 2020 11:45 am
It is not vested. It is contingent on him attaining age 40. Otherwise he loses it all. That is not a vested interest.
Gill
Vested interest includes future benefit.

But, if you want to restrict “vested” to a specific meaning, “B has an interest in the principal.”

But that is the type of semantics rejected by the tax court in the referenced trust case.

And, if B doesn’t attain 40, B doesn’t care if he loses the principal, although his heirs might.

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