Does the IRS really agree that so-called pure trusts are free from all tax requirements?
Three guesses.

No. Sorry. They don't.

Our friends, those zany pure-trust hawkers, tell you this story:

The Legend of the Tax-Exempt Pure Trust
First there is a Gentleman named Gregory P. Karl,CPA, who apparently practices out of someone else's post-office box (in care of p.o.box to be exact) in California and refers to the zip code there as a "postal zone," which is placed in brackets. Right off I suspect that this is based on some notion that the United States does not exists and that if you admit that zip codes really exist you have lost some real rights. But maybe not. Let's give Mr. Karl the benefit of the doubt. But still, those zany pure-trust hawkers, Innovative Financial Consultants use the "in care of" and "postal zone" in brackets address format. The also put the word "state" after "Arizona" in their address (so as not to confuse it with Arizona City, perhaps). Wild, ain't it? Anyway, Mr. Karl writes to the IRS on March 29, 1996. Click here to see Mr. Karl's letter (from a "Postal Zone" in California) that has been published elsewhere on the Internet. Mr. Karl tells the IRS that he wants to know the tax requirements of something called a "pure trust organization," and how to apply for an employer identification number for them. As a good CPA, Mr. Karl is surely aware that you need to file a Form SS-4 to get an employer identification number. But notice that Mr. Karl does not note anywhere on that letter that he is enclosing a Form SS-4. And what about the "received" stamps on the letter. The letter seems to have been returned to him. Note the "Received" stamp indicating the IRS received it in Philadelphia on an illegible date, and forwarded to the Accounting Branch there on April 8, 1999. Perhaps Mr. Karl hand-delivered the letter from California to Pennsylvania and had a duplicate original hand-stamped for his files. I doubt this happened. What do you think? Mr. Karl probably got the letter back with a polite note from the IRS that says, "Send us an SS-4 and we'll think about it."

Somewhere down the line, the IRS responds to Mr. Karl on December 17, 1996, more than eight months later. Click here to see the IRS's letter that has been published elsewhere on the Internet.Notice first that this letter states that, "We cannot process your application for an Employer Identification Number." Where is the SS-4 to which this letter replies? I wonder what kind of gibberish was on the SS-4. My guess is that it looks something like this (which has never before been published on the internet: Click here to see my guess.

Next, note that the letter is addressed to Mr. Karl, himself, and not his client. Apparently Mr. Karl filed an SS-4 for one of these outfits on his own behalf, because the letter was not sent to him under a tax power of attorney. Had Mr. Karl filed one of these for a client, the letter would not have been addressed to him, but he would have been copied on the letter, with a notation indicating "POA" for power of attorney. So on my hypothetical SS-4, I listed Mr. Karl as the "In-Care-of-Or," (which rhymes with "executor").

Conclusions:

     (1)  Looks like the IRS returned Mr. Karl's March 29, 1996 letter back to him. That's why he has a copy with "received" stamps on it. Mr. Karl apparently has not shared with his internet friends any IRS correspondence that accompanied the returned March 29, 1996 (why do you think this is?);

     (2)  The IRS's letter to Mr. Karl dated December 17, 1996 was not in response to Mr. Karl's March 29, 1996 letter;

     (3)  The IRS's December 17, 1996 letter to Mr. Karl was in response to an SS-4 that Mr. Karl filed on his own behalf, which he apparently has not shared with his internet friends.

I know I have destroyed alot of anti-federal-tax merriment, and I appologize. So, to make it up to you,  if you desire to enter the land of make believe, click on this link..

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