EFTA02566326

From: Harry Beller < Sent: Wednesday, February 13, 2013 3:45 PM To: Jeffrey Epstein Subject: Fwd: Sales tax - defective grantor trust Jeffrey This is the response that I received from Drew. How should = respond? Are there any documents that I can send =im Harry Begin =orwarded message: From: Drew Benenson =Ha Date: February 13, 2013 =0:39:54 AM EST To: Harry Beller Cc: Rich Kahn Subject: RE: Sales tax - defective grantor =rust Harry, Please send me the documents relating to the trust =o I can review3 them. Thank you. Drew Drew Benenson, C.P.A. Tarlow & Co., C.P.A.'s EFTA_R1_01731414 EFTA02566326 7 Penn Plaza Suite 210 New York, NY 10001 Tel - Fax - E-ma This electronic mail transmission may contain =onfidential or privileged information. If you believe that you have =eceived this message in error, please notify the sender by reply =ransmission and delete the message without copying it or disclosing =t. Pursuant to Internal Revenue Service guidance, be =dvised that any federal tax advice contained in this written or =lectronic communication, including any attachments or enclosures, is =ot intended or written to be used and it cannot be used by any person =r entity for the purpose of (i) avoiding any tax penalties that may be =mposed by the Internal Revenue Service or any other U.S. Federal taxing =uthority or agency or (ii)promoting or marketing or recommending to =nother party any transaction or matter addressed =ere. From: Harry Beller I Sent: =ednesday, February 13, 2013 10:29 AM To: Drew =enenson Cc: Rich Kahn Subject: Fwd: Sales tax - =efective grantor trust Drew =nbsp; This is the response =hat I received from Mr Epstein with respect to your =emo. Please answer his point thanks Harry 2 EFTA_R1_01731415 EFTA02566327 Subject: Re: Sales tax - defective grantor =rust the most important fact is missing =rom this analysis is that he settlor , has the right to reaquire assets =ith out the consent of th trustees, it is a right of =ubstituion, therefore he is only acting as settlor , of the =rigianl trust, he has the right to take back what was put in, =nitially, like a warranty, On Wed, Feb 13, 2013 at 11:17 AM, Harry Beller =It; . > =rote: Jeffrey Below is the opinion from Drew Benenson of Tarlow =amp; Co. The conclusion in this memo is that an exchange of art for =tock under a substitution clause in a defective grantor trust is =ubject to NY sales tax. Attached is the memo that I sent Drew to review =uggesting some authority to avoid the sales =ax. Begin=forwarded message: From: Drew Benenson =div> Date: February 12, 2013 3:39:20 PM =ST To: Harr Beller >, Rich Kahn Subject: Sales tax Harry, 3 EFTA_R1_01731416 EFTA02566328 Below is the summary we =eceived from the attorney. Let me know when you want to =peak. Thank you. Drew The memorandum Drew =enenson asked us to review looks at two issues with regard to the sales =ax consequences of a proposed transfer of art from a (defective) =rantor trust to the grantor, apparently in exchange for stock of the =rantor. The issues are: (1) whether a grantor trust =disregarded for federal income tax purposes) is recognized as a =eparate entity for sales tax purposes in a transaction with the =rantor; and (2) if so, whether its existence could be disregarded =nstead on a common-law alter-ego theory. The memo correctly =oints out that there is no direct guidance on the sales tax obligations =f grantor trusts. However, ample authority does exist with =espect to other federally disregarded entities-namely, single-member =LCs (SMLLCs)-and it confirms that New York considers an entity's =disregarded" status for federal income tax purposes to be irrelevant =ith respect to its sales tax obligations. Numerous rulings have =ound SMLLCs subject to sales tax obligations, whether in transactions =ith third parties or with their sole member. See, e.g., Arthur =nderson, TSB-A-99(7)S, Jan. 28, 1999 (ruling that leases of tangible =roperty between a federal disregarded SMLLC and its sole member-a C =orporation- were taxable retail sales on which the SMLLC was obligated =o collect tax); M Ventures, LLC, TSB-A-04(11)S, April 27, 2004 (ruling =hat aircraft leases between two SMLLC's owned by the same single member =ould be subject to tax but for an exemption for certain commercial =ircraft). The memo cites several New York rulings involving =ransactions among affiliated entities (including SMLLCs). The =epartment qualified its findings in those rulings by noting that the =nalysis presumed that the affiliated companies didn't "so dominate the =ffairs" of one another to be considered mere alter-egos of each other =nder common-law tests. But this language alone does not indicate, =s the memo suggests, that the mere structure of a defective grantor =rust obligates the Department to disregard the separate legal existence =f the trust and the grantor in a transaction between the two. In =act, similar language appears in numerous other sales tax rulings =nvolving complex corporate structures and their sales tax =onsequences-be it C corporations, partnerships or SMLLCs. Like an =ndividual, any trust (acting through its trustee) is, by statute, =onsidered a "person" subject to sales tax obligations under Tax Law § =101(a). More critically, the doctrine of piercing the corporate =eil (which the memo concludes could work to eliminate the tax here) is =ot one a taxpayer may generally invoke to avoid unfavorable tax =onsequences. As the Appellate Division has held: the =asserted right" to pierce the corporate veil "is not usually invoked by =he stockholder but by one claiming against him and seeking to avoid the =erpetration of a fraud under the cover of the corporate veil." =nbsp;(Orda v State Tax Commission, 25 A.D.2d 332, affd, 19 N.Y.2d 636). =nbsp;ln fact, New York's Court of Appeals stated in Morris v. New York =ept. of Taxation & Fin., 82 N.Y.2d 135 (1993) (a sales tax case) =hat: While complete domination of the corporation is the key to =iercing the corporate veil, especially when the owners use the =orporation as a mere device to further their personal rather than the =orporate business, such domination, standing alone, is not enough; some =howing of a wrongful or unjust act toward plaintiff is required. 82 =.Y.2d at 141-42. (emphasis added) (citations omitted). Here, the =rantor trust was ostensibly set up for legitimate business and/or =state planning purposes. Therefore, New York's position with =egard to any transaction between the trust and its grantor would =eflect the widely applied concept that a taxpayer must bear the sales =ax consequences of its chosen form of doing business. As stated =y the Appellate Division, "the choice of form [does] not rest with the =ax authorities but with the taxpayer. If he unfortunately chose a =orm which was taxable instead of an equally available form which was =ontaxable, he must bear the consequences." (Sverdlow v. Bates, 283 A.D. =87, 491; see also 107 Delaware Associates et al. v. State Tax Comm'n, =9 A.D.2d 29 (1984); Commissioner of Internal Revenue v. Moline =roperties, Inc., 131 F.2d 388 (1942). Drew Benenson, =.P.A. 4 EFTA_R1_01731417 EFTA02566329 Tarlow & Co., C.P.A.'s 7 Penn Plaza =uite 210 New York, NY 10001 Tel - -8540> Fax - -6805> E-ma This =lectronic mail transmission may contain confidential or privileged =nformation. If you believe that you have received this message in =rror, please notify the sender by reply transmission and delete the =essage without copying it or disclosing it. Pursuant to Internal =evenue Service guidance, be advised that any federal tax advice =ontained in this written or electronic communication, including any =ttachments or enclosures, is not intended or written to be used and it =annot be used by any person or entity for the purpose of (i) avoiding =ny tax penalties that may be imposed by the Internal Revenue Service or =ny other U.S. Federal taxing authority or agency or (ii)promoting or =arketing or recommending to another party any transaction or matter =ddressed here. =br> The =nformation contained in this communication is confidential, may be =ttorney-client privileged, may constitute inside information, and is =ntended only for the use of the addressee. It is the property =f Jeffrey Epstein Unauthorized use, disclosure or copying of =his communication or any part thereof is strictly prohibited and =ay be unlawful. If you have received this communication in error, =lease notify us immediately by return e-mail or by e-mail to [email protected], and destroy this =ommunication and all copies thereof, including all attachments. =opyright -all rights reserved </=iv> 5 EFTA_R1_01731418 EFTA02566330