You will provide Juan with the calculations and feedback to his question and concerns. You will utilize the steps involved in tax research beginning in Chapter 2 – page 2-24 of your text, you will need to research the tax code sections and court cases to determine the answer to the questions posed. You will need to document your research using the formats found on Figure 2.6, 2.7 & 2.8 of pages 2-31 thru 2-32 of your text.Research Problem 1. Grinder Ltd. is an S corporation that is wholly owned by Juan Plowright. Because several of Juanâ€™s ancestors have had Alzheimerâ€™s disease, Juan is transferring many of his assets to trusts, and he is funding living wills in anticipation of future medical issues.
Juan wants to transfer his Grinder stock to a trust, but he wants to keep control over its operations for as long as possible. Thus, he wants to retain a right to revoke the trust, until such time as the trustee (a Grinder executive who is on good terms with Juan) and a medical professional determine that Juan no longer is competent. You have explained to Juan that this entity is a grantor trust and that there are no income-shifting or transfer-tax-saving aspects in using such a trust.
The pertinent tax issues to be addressed are summarized below.
All parties are residents of New Mexico