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Author: HaltCatchFire Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 17905  
Subject: Re: inherited fund Date: 8/25/2012 10:07 AM
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This is treated like a mutual fund but is actually a grantors trust??

The set-up is indeed odd. This was created as a trust under NY law in the 1930s. Skimming through the prospectus it seems avoiding income tax was a key consideration.

I was able to pull this from the prospectus:

Taxation

For federal income tax purposes, (1) the Trust will be treated as a fixed investment trust and will not be subject to federal income tax, (2) each participant will be treated as the owner of his/her pro rata portion of the common stock of the corporations held by the Trust, (3) each participant will be required to include in his/her gross income and his/her pro rata portion of the dividends and interest received by the Trust (including the amounts of such dividends and interest that are not distributed to participants but are used to pay the fees and expenses of the Trust), at the time such dividends and interest are received by the Trust, not at the later time such dividends and interests are distributed to participants or reinvested in additional participations, and (4) each individual participant who itemizes deductions may be able to deduct his/her pro rata portion of the fees and expenses of the Trust only to the extent that such amount, together with his/her other miscellaneous itemized deductions, exceeds 2% of his/her adjusted gross income. See “Taxation” herein.


If you don't have a prospectus, get one. I was able to get an electronic version from my brokerage. You should be able to get one directly from IMG or from your brokerage.

The implication is that there are or will be tax implications when you sell this. Consult your tax professionals. Trusts can be weird in this regard.

HTH,

- HCF
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