THE AMERICAN LAW INSTITUTE Continuing Legal Education

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THE AMERICAN LAW INSTITUTE
Continuing Legal Education
Aragona Trust Deconstructed:
What Is "Material Participation" by a Trust
June 4, 2014
Telephone Seminar/Audio Webcast
Impact of Trust Drafting on the Aragona Trust Decision
Slides
By
Richard L. Dees
McDermott, Will & Emery
Chicago, Illinois
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Impact of Trust Drafting on the
Aragona Trust Decision
Prepared by Richard L. Dees
May 28, 2014
www.mwe.com
Boston Bruxelles Chicago Düsseldorf
Francfort Houston
Londres
Los Angeles
Miami Milan Munich New York Orange County Paris Rome Séoul Silicon Valley
Washington, D.C. Alliance stratégique avec MWE China Law Offices (Shanghai)
© 2014 McDermott Will & Emery. Les entités suivantes sont collectivement désignées "McDermott Will & Emery", "McDermott" ou "la Firme": McDermott Will & Emery LLP, McDermott Will & Emery AARPI, McDermott
Will & Emery Belgium LLP, McDermott Will & Emery Rechtsanwälte Steuerberater LLP, McDermott Will & Emery Studio Legale Associato et McDermott Will & Emery UK LLP. Ces entités coordonnent leurs activités via
des contrats de prestations de services. McDermott bénéficie d'une alliance stratégique avec MWE China Law Offices, cabinet d'avocats distinct.
Aragona Trust Structure
Frank Aragona
Trust
• Trustees: 5 children and a lawyer – one son Anthony was disabled, Salvatore
was a full-time dentist, Paul and Frank were full-time in the real estate
businesses and Annette was a full-time employee of Holiday Enterprises, LLC,
although not full-time in real estate apparently
• Beneficiaries: All of the children with income paid annually in equal shares,
discretionary principal could be paid by lawyer’s direction as independent
trustee
• Holiday Enterprises, LLC, that employed the three trustees was a disregarded
entity, but that does not figure in the court’s decision. IRS argued that it
should NOT be disregarded for purposes of determining material
participation
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Separate Trusts for Each Child
Anthony
Trust
Annette
Trust
Paul
Trust
Frank
Trust
Salvatore
Trust
• Trustees: 5 children and a lawyer – one son Anthony was disabled,
Salvatore was a full-time dentist, Paul and Frank were full-time in the real
estate businesses and Annette was a full-time employee of Holiday
Enterprises, LLC, although not full-time in real estate apparently
• Beneficiaries: Each child is a beneficiary of his or her own separate trust;
would accumulating income or naming the children’s descendants as
beneficiaries too affect treatment under Section 469?
• Holiday Enterprises, LLC, that employed the three trustees would not be
disregarded
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Separate Trusts with Different
Trustees
Anthony
Trust
Annette
Trust
Paul
Trust
Frank
Trust
Salvatore
Trust
• Trustees of each trust: named child and lawyer
• Beneficiaries: Each child is a beneficiary of his or her own separate trust;
would accumulating income or naming the children’s descendants as
beneficiaries too affect treatment under Section 469?
• Holiday Enterprises, LLC, that employed the three trustees would not be
disregarded. Assume each trustee elects himself or herself to the Board of
Managers of LLC
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