Example:
Mike owns 100% of an LLC worth $2 million. His cost basis is $100,000. He successfully defended a few lawsuits recently and is worried about his assets. He decides to put the LLC in a Non-grantor Irrevocable Trust with zero influence of control of the assets or trustees. I believe the law clearly states this is no longer his asset at all.
Someone informs Mike that if he dies the beneficiaries of the irrevocable trust get the LLC at a cost basis of $100,000 so they have a nice tax bill awaiting them if they sell it for $2 million.
Mike thinks about this and 5 years later it appears there are no more lawsuits. Mike now decides that he wants to buy the LLC back for $100,000 in cash. The trustees of the Irrev Trust consult with the bene's and get a signed agreement by all interested parties allowing this purchase. 10 years later Mike passes away and the benes of his estate now get the Asset step-up value vs having to pay tax on the difference in cost basis and sales price had Mike not purchased it back.
My question is: is this movement of assets valid and legal? I don't see any holes in this strategy other than the irs somehow saying there were some fun and games being player, but I'd like to know what they would argue and/or any case law to look up.
Thanks.
Mike owns 100% of an LLC worth $2 million. His cost basis is $100,000. He successfully defended a few lawsuits recently and is worried about his assets. He decides to put the LLC in a Non-grantor Irrevocable Trust with zero influence of control of the assets or trustees. I believe the law clearly states this is no longer his asset at all.
Someone informs Mike that if he dies the beneficiaries of the irrevocable trust get the LLC at a cost basis of $100,000 so they have a nice tax bill awaiting them if they sell it for $2 million.
Mike thinks about this and 5 years later it appears there are no more lawsuits. Mike now decides that he wants to buy the LLC back for $100,000 in cash. The trustees of the Irrev Trust consult with the bene's and get a signed agreement by all interested parties allowing this purchase. 10 years later Mike passes away and the benes of his estate now get the Asset step-up value vs having to pay tax on the difference in cost basis and sales price had Mike not purchased it back.
My question is: is this movement of assets valid and legal? I don't see any holes in this strategy other than the irs somehow saying there were some fun and games being player, but I'd like to know what they would argue and/or any case law to look up.
Thanks.
Federal Taxes: Repurchase of Non-Grantor Irrevocable Trust Asset
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