Section 643(b) Spendthrift Trust

Classification A, no legitimate version. There is no compliant way to do this as it is marketed.

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"

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.

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.

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

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

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?

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