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IRS warns of tax scam

Recently, the Internal Revenue Service, issued a warning to taxpayers about tax scams which involve trusts.

Promoters of abusive tax transactions are on the rise. These promoters urge unsuspecting clients to transfer their assets into trusts while promising a number of benefits, such as reduction of income subject to tax, deductions for personal expenses paid by the trust and reduction of gift or estate taxes.

All should be aware that abusive trust arrangements do not produce tax benefits that are promised by promoters, and that the IRS is examining these kinds of trust arrangements. There have been over a dozen injunctions obtained in recent years against such promoters, and a number of them, as well as their clients, have been prosecuted. Therefore, always seek the advice of a trusted tax professional before entering into any trust arrangements.