Prohibited transaction

Prohibited transaction

Forum topic posted in Forum on 10 April 2011| 1 comments
audience: | last updated: 10 April 2011
2 posts / 0 new
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Joined: 04/10/2011
Points: 30
I have run into a situation with a CRUT established 15 years ago and has done well. The income beneficiary was wanting to get out of the market and get a decent fixed rate. The CRUT pays out 5% annualy. The CRUT owes the income bene $300,000. It is NIMCRUT. The trustee is a family member. A couple of years ago the Trustee agreed to lend the income bene funds to pruchase an investment property. The mortgage rate was at market rate and all payments have been made. I have mentioned that this may be a prohibited transaction and it may be wise for income bene to get property refinanced and pay the CRUT back. What would possible penalities be to CRUT if it were classified as a prohibited transaction?

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Joined: 10/24/2002
Points: 90
Prohibited Transactions/CRUT
More information is needed. Who are the parties to the trust, that is, the grantor, trustee, beneficiary, mortgage company. Congress extended the private foundation prohibited transaction rules to CRTs under IRC sec. 4947. You need to determine who are the 'disqualified persons'. John B. Atkins, JD, CTFA Trust Officer
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