Scam Trusts Exposed: What the IRS Really Thinks

Not every trust is what it claims to be. In this interview, John Strohmeyer and Brent Nelson tackle the rise of sham trust schemes—arrangements that promoters sell as tax-free magic but that the IRS and courts routinely strike down. We cover why Markosian v. Commissioner is still good law, how the IRS views abusive 643(b) and “extraordinary dividend” arguments, and why conflating taxable income with distributable net income (DNI) leads people into serious trouble. We also explain the four-part test courts use to determine whether a trust has real economic substance or is just a paper tiger. If you’ve ever been pitched a “secret trust” that promises to eliminate taxes, this discussion will show you what the law actually says—and why falling for these schemes can cost you penalties, interest, and even criminal exposure. Strohmeyer Law PLLC is a law firm based in Houston, Texas, specializing in tax law, estate planning, and probate law. Nothing in this video is specific legal advice for you. Watching or commenting on this video doesn't create an attorney-client relationship.