Richard R. Pelham and Paula A. Pelham - Page 10




                                       - 10 -                                         
          successor trustee.  Under the terms of the trust, the trustee had           
          the power to appoint successor trustees and cotrustees.                     
               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, Richard Pelham had the ability to control fully the                
          trust’s activities and trust assets for his own benefit because             
          no independent trustee had any meaningful control over the                  
          management of the trust.                                                    
               No one other than Richard Pelham held any meaningful                   
          economic interest in the trust because, under the terms of the              
          trust agreement, Richard Pelham was the named beneficiary of the            
          income and principal of the trust.                                          
               Petitioners argue that Richard Pelham achieved benefits from           
          operating the sole proprietorship within a trust and not forming            
          a corporation because:  (1) The trust could avoid the State                 
          franchise tax imposed on the profits of a corporation, which                
          would have been approximately $2,040; (2) the trust would not               
          have to pay the State incorporation filing fee of $300; and                 
          (3) the trust did not have to maintain corporate formalities,               
          such as shareholder minutes.                                                
               Petitioners’ argument that a trust had advantages over a               
          corporation misses the point.  The incorporation alternative is             
          not an issue here.  Petitioners chose the form of a trust and are           






Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  Next

Last modified: May 25, 2011