Selected Court Cases

These are a few existing court cases that have proven the legal points of a Trust. You are encouraged to investigate the validity of any trust. This is for educational purposes only and is NOT intended to be a legal brief or provide legal advise.

CONFIRMING THE TRUST CONTRACT
Certificate holders are devoid of legal rights, have no officers, are and must remain forever mute as to the selection, approval or disapproval of the trustees and their methods of conduct of business affairs would make the trustee absolute owner.
- Bourchard v. First People's Trust, 253 Mass 351, 148 NE 895
- A Trust is one of several juridical devices whereby one person is enabled to deal with property for the benefit of another person.;
  - Restatement of the Law of Trusts, 2d Introductory Note, Pg 1

CONTRACT TRUST RECOGNIZED BY IRS
- The owner of Beneficial Certificates is not an owner as a stockholder is an owner; that Certificate Holders have no ownership whatever in property held by the Contract Trust, nor do they have any voice or control over the Trustees.;
  - 296 US 48, 50; 80L Ed 35; 56 S Ct 78

NO GIFT OR ESTATE TAXES
- Certificates have no ascertainable "Fair Market Value," and have minimal value to someone else. Bad bargains do not result in taxable gifts. Contract Trust is a genuine business transaction.
  - 8 Tax Court 786.721

NO CAPITAL GAINS TAXES
- Interests which terminate "on" or "before" death are not a proper subject of the Federal Estate Tax.
  - Babb v. US 349 F Supp 792 (1972)

CONTRACT TRUST AS A LEGAL ENTITY
- The fact that transactions of business are so arranged that tax consequences are highly favorable (or altogether avoid taxes) affords no license to the government to recast it into a mold of less advantage.
  - Peter Pan Seafoods, Inc. v. US, 417 F 2d 670

LEGAL AND EQUITABLE TITLE HELD BY CONTRACT TRUST
- When legal and equitable title, possession and control of property are legally and irrevocably passed from the Trustor (contracting investor) to himself as Trustee in legal contemplation, it is as though the Trustee receiving the conveyance is another person.
  - Commissioner of Internal Revenue v. St. Lous Union Trust Co., 296 US 48, 50 (1935)

FOREIGN CONDUIT, (FOREIGN STRUCTURE), MISCELLANEOUS
- Since 1967 the Internal Revenue Code has actually provided that a blanket exemption from federal gift taxation is provided for all gifts made by a nonresident alien of intangible property even though the cites or location of that intangible property is within the United States.
  - IRC Sec. 2501 (a) (2). All intangibles include stock, bonds, funds, notes or other certificates of indebtedness (not Federal Reserve Notes "green backs" or U.S. currency, or checks drawn on U.S. banks --- IRR Sec. 25.2511-3 (b)(4)(IV)), bank accounts, or U.S. government bonds,. etc.