yes from mr_brrr because he didn't specify the rules that must be followed in order to avoid any income earned by a trust or tax-exempt entity from being taxed to you.
for example, a private foundation.
it can pay taxes
1 Tax on undistributed income
2 Tax on excess business holdings
3 Tax on investments that jeopardize charitable purpose
4 Tax on taxable expenditures
5 Tax on political expenditures
6 Tax on excess lobbying expenditures
7 Tax on disqualifying lobbying expenditures
8 Tax on premiums paid on personal benefit contracts
9 Tax on being a party to prohibited tax shelter transactions
10 Tax on taxable distributions
11 Tax on a charitable remainder trust’s unrelated business taxable income.
12 Tax on failure to meet the requirements of section 501(r)(3)
13 Tax on excess executive compensation
14 Tax on net investment income of private colleges and universities
Part II Taxes on a Manager, Self-Dealer, Disqualified Person, Donor, Donor Advisor, or Related Person
(Sections 4912(b), 4941(a), 4944(a)(2), 4945(a)(2), 4955(a)(2), 4958(a), 4965(a)(2), 4966(a)(2), and 4967(a))
1 Tax on self-dealing
2 Tax on investments that jeopardize charitable purposes
3 Tax on taxable expenditures
4 Tax on political expenditures
5 Tax on disqualifying lobbying expenditures
6 Tax on excess benefit transactions
7 Tax on being a party to prohibited tax shelter transactions
8 Tax on taxable distributions
9 Tax on prohibited benefits
even if you avoid these pitfalls if you take any money out it would either be illegal or taxable compensation which is subject to social security, medicare and maybe unemployment taxes. also, there is no preferred income tax rate as there is for long-term gains.
trusts also have restrictions and rules that must be followed to avoid all its income being taxes to you. taxes on income retained by a trust are at a higher rate than for individuals. any income distributed to you gets taxed.
yes, the rich avoid taxes by given up control of some of their wealth.
Yes
No
