Your client Ming is a complex trust that operates exclusively in the United States. Make a list of five or more tax planning opportunities that you might suggest to Ming.
What will be an ideal response?
When fiduciary entities are used to shift income among taxpayers, the following planning objectives should be kept in mind:?
| ? | Sprinkling trusts allow flexibility for the trustee to direct income in a taxwise manner. |
| ? | High-income and high-wealth taxpayers usually should be given second-tier beneficiary status. |
| ? | Income shifting goals are limited by the fiduciary’s high marginal tax rates, and by the kiddie tax. |
| ? | Trust vehicles should be restricted to cases for which professional management will produce asset returns sufficient to justify the associated administrative costs. |
| ? | When investments in exempt securities are attractive, direct ownership rather than trustee control may be preferable so that the § 103 exclusion can be retained by the grantor. |
| ? | Fiduciaries can incur the additional income taxes on net investment income and capital gains. |
| ? | Entity termination dates should be chosen so as to maximize fiduciary deductions but not to bunch beneficiary income recognition. |
| ? | Fiduciary expenses generally should be claimed by the taxpayer who is subject to the highest marginal income tax rate. |
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