Skip to content 
Here’s the takeaway – IF it seems to good to be true? It probably is
Here’s another truth – it is easier to fool someone than convince them that they are being fooled.
Forbes magazine warned about this word salad in 2023 – Click here.
The basic idea is an old one when it comes to tax scams, being that no income tax has to be paid on the trust’s income so long as no distributions are made to beneficiaries. Eventually, according to the promoters, when distributions are finally made, then some tax might or might not have to be paid at that future time, but not now.
Thus, also according to the promoters, if a taxpayer can get a heavily appreciated asset into the trust, the taxpayer can use the trust to churn the asset without paying capital gains taxes on the sale now. This also of course means they will have a much larger amount to invest in the meantime. The promoters also say such trusts can effectively sponge up large income streams, such as from royalties, and not pay taxes on those moneys until they are distributed to beneficiaries. It sounds good; it is also totally false.
Also in 2023, the IRS Office of the Chief Counsel issued a memo. This memorandum rebuts the promoters’ misinterpretation of § 643 – Click here.
Finally, there is even a section on the IRS website about it which was updated in 2025 – Click here.
If Tik Tok is your source of financial education? Careful….
