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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 15308
Experience:  15years with H & R Block. Divisional leader, Instructor
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My accountant suggested I set up a qualified trust. He

Customer Question

Hello,
My accountant suggested I set up a qualified trust. He mentioned that there are many types of trusts but not all of them will have tax benefits. The Tax benefits is the primary reason for me to set up a trust.
It sounded like I would contribute a certain amount of money into the trust and the trust to contribute to my LLC to become a partner. He also mentioned that not all types of trust could be shareholders of an LLC or S-corp.
Lastly, I will be a father in February next year. Again, according to my accountant, after the baby’s born, I could use the trust to pay all cost related to him. These cost will be considered as his income and we would file an individual tax return for him. Since his/her tax rate will be much lower than mine, I would save on the difference.
MY QUESTIONS:
Does any of this make sense?
What trust do you suggest I set up?
And do I need a layer get this set up?
Thank you all!!
Submitted: 1 year ago.
Category: Tax
Expert:  Robin D. replied 1 year ago.

Hello,

Occasionally, caterers will rent or lease from a third party , to rent to customers without furnishing or serving any meals, food, or drinks to the customer. In these situations, they are not acting as a caterer within the meaning of this regulation, but solely as a lessor of tangible personal property. Tax applies to such leases.

You stated ." We will be charging the client the cost of the food truck design, wrap, and unwrap. We will also be charging the client for the actual "food truck rental." That makes that portion also taxable to your client.

Customer: replied 1 year ago.
Your response is 100% irrelevant to my question.
Expert:  Robin D. replied 1 year ago.

I know I am so sorry

Customer: replied 1 year ago.
You are speaking of a caterer and leases/?????
Expert:  Robin D. replied 1 year ago.

I was answering another and my post was added to your question

Customer: replied 1 year ago.
ok
Expert:  Robin D. replied 1 year ago.

I alerted customer support

Expert:  Robin D. replied 1 year ago.

One second please.

Customer: replied 1 year ago.
Please take your time to answer my question and be as detailed as possible. I will need to know the Trust type and who to contact to get it set up.
Expert:  Robin D. replied 1 year ago.

Your accountant is correct. The trust laws do govern what trust can be a member.

If your child has a trust and receives income then your child would be taxed but you may be allowed the lower rate for your child.

Under the kiddie tax, children pay tax at their own income tax rate on unearned income they receive up to a threshold amount ($2,100 in 2015). All unearned income kids receive above the threshold amount is taxed at their parent's highest income tax rate. Depending on how much your child was to earn from the trust and the type of income would determine the actual tax advantage.

A trust is created when you (the grantor) transfer property to a trustee for the benefit of a third person (the beneficiary). Who is liable for taxes on income earned by a trust depends on who receives or retains benefits from the trust .

Trust income retained by the trust is taxed to the trust, while distributed income is taxed to the beneficiary who receives it.

Income earned by the trust can be in the form of interest, dividends, ordinary income, or capital gain. The character of the income stays the same when passed to the beneficiary.

If your child received earned income then that would not be under Kiddie Tax but if the Income was Unearned in character that would be under Kiddie Tax rules. This would mean you may still be paying tax on the amount over the threshold at your higher rate.

Expert:  Robin D. replied 1 year ago.

I sincerely ***** ***** the mix up in the beginning. They have made many changes to our site recently and I can only say that I was typing an answer to another but did not see that your question had populated my screen.