CIM Trust - Page 11




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               Petitioners assert that the personal expenses that were paid           
          from the trust bank account were accounted for as a distribution            
          and that only the legitimate business expenses were deducted.               
          Even so, the Morrows had the ability to control fully the trust’s           
          activities and trust assets for their own benefit because no                
          independent trustee had any meaningful control over the                     
          management of the trust.                                                    
               No one other than the Morrows held any meaningful economic             
          interest in the trust because, under the terms of the trust                 
          agreement, Charlotte Morrow was the named beneficiary and Peter             
          Morrow was the successor beneficiary of the income and principal            
          of the trust.                                                               
               Petitioners argue that the Morrows achieved benefits from              
          operating their sole proprietorship within a trust and not                  
          forming a corporation because:  (1) The trust could protect the             
          business assets from their personal liabilities and conversely              
          protect their personal assets from liabilities arising from the             
          business operations; (2) the trust could avoid the State                    
          franchise tax imposed on the profits of a corporation, which                
          would have been approximately $1,105; (3) the trust would not               
          have to pay the State incorporation filing fee of $300; and                 
          (4) the trust did not have to maintain corporate formalities,               
          such as shareholder minutes.                                                








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Last modified: May 25, 2011