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Mark
Mark, Attorney
Category: Estate Law
Satisfied Customers: 541
Experience:  20 years in estate planning and probate
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An LLC was placed in a Grantor Retained Annuity Trust. The

Customer Question

An LLC was placed in a Grantor Retained Annuity Trust. The GRAT had 4 beneficiaries. A rental property that was held under the name of the LLC was sold PRIOR to the end term date of the GRAT. The Grantor as a result will pay the capital gains taxes. Does the grantor pay the taxes under the GRAT trust account ? and will the grantor have to pay unincorporated business tax?
Submitted: 1 year ago.
Category: Estate Law
Customer: replied 1 year ago.
The LLC is based in NYC and is filed as sole proprietor(disregarded entity)
Customer: replied 1 year ago.
please forward to estate lawyer who may be better familiar
Customer: replied 1 year ago.
no answer?
Expert:  Mark replied 1 year ago.

A GRAT is deemed to be a grantor trust. Therefore, any income generated or capital gains realized within the GRAT during the GRAT term would be income taxed to the grantor—just as if the asset remained in the grantor's name. This would be the case even in situations where the income tax liability exceeds the annual annuity payable to the grantor.

Customer: replied 1 year ago.
Does the grantor pay the taxes under the GRAT trust bank account ? and will the grantor have to pay unincorporated business tax?
Expert:  Mark replied 1 year ago.

The grantor should pay it. Who set it up? I would go ask the attorney who helped you set it up?

Expert:  Mark replied 1 year ago.

Was the rental property in NY?

Customer: replied 1 year ago.
the GRAT was setup by an attorney. There was the GRAT bank account and the business LLC account. The question was whether it made any difference which account the Grantor paid the capital gains taxs out of. And yes it was in NYC,so does the unincorporated business tax apply?
Expert:  Mark replied 1 year ago.

I don't know. I would ask the attorney who set it up.

Expert:  Mark replied 1 year ago.

Did the attorney say it would? I would run it by your accountant. If it is taxed to the grantor, then I would probably apply. Is the trust irrevocable?

Expert:  Mark replied 1 year ago.

it would probably apply.

Expert:  Mark replied 1 year ago.

https://rules.cityofnewyork.us/content/section-28-02-unincorporated-business-defined

It says it applies to trustees.

Expert:  Mark replied 1 year ago.

I would suggest that you talk to a New York estate planning attorney or CPA with experience with GRATs. I would suggest going back to the attorney who set it up. They should have the answers to your questions.

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