Promoter structures library
Section 643(b) Spendthrift Trust
Sold as: "643(b) trust", "non-grantor irrevocable complex discretionary spendthrift trust", "copyrighted trust", "pure trust", "business trust", "constitutional trust", "own nothing control everything", "the trust the wealthy use"
Technical name: There is not one. It is a marketing label wrapped around ordinary Subchapter J.
Any structure whose selling point is that income is never taxed by anyone is a fraud, not a trust. Four promoters were convicted in June 2026 and one is already serving 151 months.
Classification A. There is no compliant way to do this as it is marketed.
The pitch
Sell your business or practice income into the trust. The trustee allocates capital gains, dividends, and royalties to corpus rather than income. Because Sec. 643(b) says those amounts shall not be considered income, nothing is taxed until distributed, and distributions never happen. Personal living expenses become trust deductions. Marketed heavily on social media and in seminar rooms, often with fabricated opinion letters and cherry-picked old private letter rulings.
Where it breaks
Sec. 643(b) defines FIDUCIARY ACCOUNTING INCOME, not taxable income. It governs WHO is taxed through DNI allocation, not WHETHER. Sec. 641 taxes the trust on its taxable income. Sec. 643(a)(3)-(4) exclude certain gains from DNI, which keeps the tax AT THE TRUST, not nowhere. Retained controls trip the grantor trust rules at Sec. 671-679, taxing the settlor directly. Add assignment of income under Lucas v. Earl, Sec. 61, and Sec. 262 barring deduction of personal living expenses.
What it costs you if it is wrong
The income was always taxable, either to the trust under Sec. 641 or to you under the Sec. 671-679 grantor trust rules, and the personal living expenses deducted along the way come back under Sec. 262. This is also the live criminal one. Four promoters were convicted in June 2026, another pleaded guilty in August, and one co-conspirator is already serving 151 months. AM 2023-006 designated the marketers as promoters, which brings Sec. 6700 penalties of 50 percent of gross income derived.
Red flags specific to this structure
- The claim is that the income is taxed to nobody
- The marketing uses 'own nothing, control everything'
- Personal living expenses are described as trust deductions
- The opinion letter relies on private letter rulings issued to other taxpayers
- It was sold from a stage at a seminar
Questions to ask the person selling this
Take these into the next meeting. Someone selling the legitimate version answers them without difficulty.
- 1If this income is not taxed to me and not to the trust, who does the IRS say pays it?
- 2Will the trust file Form 1041 and pay tax on undistributed income?
- 3Which of the Sec. 671-679 powers am I giving up?
- 4Are my personal living expenses being deducted by the trust?
- 5Is the opinion letter written for me, or is it a ruling issued to somebody else?
- 6Has any version of this been tested in court, and how did it come out?
Which of the Seven Markers this trips
A promised deduction or savings multiple
The client keeps control of what they supposedly gave away
'The IRS has never listed this'
The legitimate version
Non-grantor trusts are entirely real and useful: incomplete gift non-grantor trusts for state tax planning, completed-gift non-grantor trusts for Sec. 199A threshold or SALT purposes, IDGTs, and ordinary complex trusts.
What distinguishes it
- The trust genuinely files Form 1041 AND PAYS TAX on undistributed taxable income at compressed rates
- The grantor gives up beneficial enjoyment and the Sec. 671-679 powers
- Personal expenses are not deducted
- Nobody claims capital gains vanish
What the courts have done
How this has actually gone for the people who bought one.
Enforcement
- headline
This is the live criminal one for 2026.
- cases
- case
United States v. Predmore, Prescott, Thompson, Wulstein
- outcome
All four convicted June 8, 2026 of conspiracy to defraud the United States
- detail
Layered business trust plus family trust plus charitable trust plus private family foundation, marketed at nationwide seminars to high-net-worth business owners under the slogan 'own nothing, control everything,' claiming to shelter up to 98 percent of business profits. Setup fees 25,000 to 50,000 dollars. Hundreds of business owners bought it. Roughly 40,000,000 dollars tax loss. Wulstein was a CPA who prepared hundreds of false returns. Thompson ran the bookkeeping firm.
- case
United States v. Larry C. Conner
- outcome
Pleaded guilty August 12, 2026, sentencing January 26, 2027
- detail
Promoted non-grantor trusts plus a private family foundation through The Business Solutions Group at in-person seminars. Fees 25,000 to 50,000 dollars per client. Sheltered roughly 156,000,000 dollars of client income, roughly 43,000,000 dollars tax loss. Six co-conspirators including a CPA, a bookkeeper, and a tax preparer. One co-conspirator is serving 151 months.
Reporting status
Not designated. Attacked under Sec. 641, Sec. 671-679, AM 2023-006, and criminally.
Typical fees
5,000 to 70,000 dollars per the IRS abusive trust schemes page. The criminal cases show 25,000 to 50,000 dollars.
Holding one of these, or being pitched one?
The diagnostic work is worth doing before the return gets filed rather than after. That is a conversation, not an engagement.
Schedule a complimentary consultationTake this into the meeting: the one-page brief
Statutes, regulations, and rulingsthe authority behind everything above
Authority
- guidance
Chief Counsel Memorandum AM 2023-006 (August 2023). The IRS designated the marketers as promoters, signaling client-list summonses and promoter exams with Sec. 6700 penalties of 50% of gross income derived from the promotion, with no deduction for expenses.
- verification note
Sources give the AM 2023-006 date as either August 9 or August 18, 2023. Confirm before citing a specific date.