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Thread: Small Arms Review and NFA Trusts

  1. #31
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    Quote Originally Posted by khc3 View Post
    I'll respect your desire to refrain from commenting ;0), but I never understood why this is an issue for ATF.

    A prohibited person obtaining a firearm through a trust is no more legally entitled to possess it than a prohibited person who gains possession of one through theft, or buying it from a non-licensee.

    Approving a firearm transfer or registration for a trust does not give a prohibited person imprimatur to possess it. I don't know why ATF acts as if it does.

    Everything can be an issue to the ATF, hence my position in our conversation about SBR's.

    Years ago it was a boon for some of us that lived in an area that couldn't get sign offs. The solution was corporations. Once word spread, there were corporate transfers everywhere. Guys were creating corps for the sole purpose of purchasing NFA items. It was and still is a thorn in the side of the ATF. They don't like it.

    One thing you must understand though, only the officers of the corp. can possess the NFA item, therefore, none of the officers can be prohibited persons.

    Employees other than officers are allowed temporary possession say for LE demo's and such, but can't take them home with them after the demo. These employees can not be prohibited persons either.

    The new kid on the block is trusts. It is also a thorn in the side of the ATF. I have never done a transfer to a trust so I am a bit behind the curve on that one.

    I would say most within the ATF consider both a loophole and would like to see them eliminated because they sidestep the LE endorsement requirement. The other side, the NFA community, would like to see the LE endorsement removed from the form 4.

    Initially as I understand it, the original purpose of the LE endorsement is to remove the onus from ATF of having to look up every state and local ordinance regarding NFA ownership. Surely the $200 tax would cover the required time to do so. Now, possibly unintentionally it gives the local authorities a invalid reason to prohibit the ownership of NFA items. There has been a few lawsuits trying to force sheriffs or police chiefs to sign as part of their duty, but most have gone nowhere.

    Also, and I don't remember the exact case, but an LE chief was sued by the family of a dead drug dealer shot by a MAC 10 IIRC, because he signed off on the from 4 for the shooter. I guess they thought the chief was in some way responsible for the death of their drug dealing son. The family lost. That should have set precedence that the requirement is ludicrous and by signing the form 4, that the city or whatever absorbs the liability. That is the common excuse the LE chief uses as contrived by the city attorney – potential liability.

    The part that asks if the NFA item is going to be used for 'legal purposes' is just retarded.

  2. #32
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    Quote Originally Posted by Coleslaw View Post
    Everything can be an issue to the ATF, hence my position in our conversation about SBR's.

    Years ago it was a boon for some of us that lived in an area that couldn't get sign offs. The solution was corporations. Once word spread, there were corporate transfers everywhere. Guys were creating corps for the sole purpose of purchasing NFA items. It was and still is a thorn in the side of the ATF. They don't like it.

    One thing you must understand though, only the officers of the corp. can possess the NFA item, therefore, none of the officers can be prohibited persons.

    Employees other than officers are allowed temporary possession say for LE demo's and such, but can't take them home with them after the demo. These employees can not be prohibited persons either.

    The new kid on the block is trusts. It is also a thorn in the side of the ATF. I have never done a transfer to a trust so I am a bit behind the curve on that one.

    I would say most within the ATF consider both a loophole and would like to see them eliminated because they sidestep the LE endorsement requirement. The other side, the NFA community, would like to see the LE endorsement removed from the form 4.

    Initially as I understand it, the original purpose of the LE endorsement is to remove the onus from ATF of having to look up every state and local ordinance regarding NFA ownership. Surely the $200 tax would cover the required time to do so. Now, possibly unintentionally it gives the local authorities a invalid reason to prohibit the ownership of NFA items. There has been a few lawsuits trying to force sheriffs or police chiefs to sign as part of their duty, but most have gone nowhere.

    Also, and I don't remember the exact case, but an LE chief was sued by the family of a dead drug dealer shot by a MAC 10 IIRC, because he signed off on the from 4 for the shooter. I guess they thought the chief was in some way responsible for the death of their drug dealing son. The family lost. That should have set precedence that the requirement is ludicrous and by signing the form 4, that the city or whatever absorbs the liability. That is the common excuse the LE chief uses as contrived by the city attorney – potential liability.

    The part that asks if the NFA item is going to be used for 'legal purposes' is just retarded.
    I believe it has more to do with local matters such as temporary orders and criminal complaints that haven't or won't show up during a federal background check.

  3. #33
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    Ok, Possbily that too. But just imagine the length of time for transfers if you had to depend on the feds to look up the thousands of state and local ordinance across the US of A to determine legality of NFA ownership for every tax paid transfer. Particulalry when the were still in DC!! Can you imagine?

    The feds have never wanted that responsibility.
    Last edited by Coleslaw; 09-29-10 at 12:45.

  4. #34
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    Quote Originally Posted by MK18Pilot View Post
    I believe it has more to do with local matters such as temporary orders and criminal complaints that haven't or won't show up during a federal background check.
    No, coleslaw is correct on this. In 1934 it was nearly impossible for IRS in DC to know the laws of all 50 states and subdivisions. There was no NCIC, and fingerprints were not even a mature science. The CLEO signoff was a result of trying to solve this problem.

    ETA:

    The MAC10 lawsuit was a result of the Roger Waller case.
    Last edited by Renegade; 09-29-10 at 20:52.

  5. #35
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    Quote Originally Posted by MK18Pilot View Post
    whereas LLC's are animals of the state they were formed in and are a disregarded entity at the federal level.
    LLC's are not disregarded at the federal level. The IRS allows you to choose filing returns as a either a corporation, partnership or sole proprietor (schedule C on an individual return). States usually have a yearly filing fee as well.

    What corporations and LLC's give you that a trust doesn't is limited liability. That can be a benefit in some circumstances.
    SF

  6. #36
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    Quote Originally Posted by chadbag View Post
    The reason I would consult a knowledgable attorney with a trust if I were going that route is to make sure all the "i"s are dotted and the "t"s are crossed. If you screw up, and the ATF finds out, your trust could be invalidated and then all your NFA toys are illegally held and confiscated.

    Is it not worth a few hundred dollars to double check everything and make sure there are no mistakes?
    As has been discussed before on this forum, this is excellent advice.

    Quote Originally Posted by USMC_Anglico View Post
    What corporations and LLC's give you that a trust doesn't is limited liability. That can be a benefit in some circumstances.
    Sometimes. Corporations and LLC's can give you limited liability from corporate debts, etc., if you are using them to run your business and you mind your p's and q's. You are always liable for your own criminal and negligent acts no matter what entity you set up.

    If you are running a business and already have an LLC or a corporation, it doesn't make much sense to set up a trust just for NFA purposes - just use the existing entity (if you aren't already incorporated, you should be). If you have significant assets, trusts can be excellent estate planning and management tools that can also own NFA items. If you have neither significant assets nor a preexisting business and NFA ownership is your only goal, I have a hard time thinking of a situation where an NFA trust would not just be more convenient than fooling with a corporate entity and all of the hoops you have to jump through on an on-going basis.

    Everything depends on your ultimate goals. I have set up a full blown trust that I will use as an estate planning tool for the rest of my life. That it can own NFA items is a side benefit. The issue of my beneficiaries having to deal with an additional transfer tax is not something that I lose a lot of sleep over, but YMMV.

  7. #37
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    Quote Originally Posted by USMC_Anglico View Post
    LLC's are not disregarded at the federal level. The IRS allows you to choose filing returns as a either a corporation, partnership or sole proprietor (schedule C on an individual return). States usually have a yearly filing fee as well.

    What corporations and LLC's give you that a trust doesn't is limited liability. That can be a benefit in some circumstances.
    You proved my point jackwagon. There is no checkbox for an LLC on any federal tax document. An LLC is absolutely a disregarded entity. Why are federal tax liens filed against the members of the LLC and the not the entity itself? Who gives your entity authority, your state or the federal government. The fed's only recognize corporations because they benefit from a double tax against them.

    Quote Originally Posted by TriumphRat675 View Post
    If you are running a business and already have an LLC or a corporation, it doesn't make much sense to set up a trust just for NFA purposes - just use the existing entity (if you aren't already incorporated, you should be).
    It makes terrible sense to use existing LLC that is an operating business. If your entity is put into legal jeopardy or bankruptcy and the entity is dissolved, just call the ATF and have them pick up your stuff.
    Last edited by MarkG; 09-30-10 at 21:47.

  8. #38
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    Quote Originally Posted by MK18Pilot View Post
    If your entity is put into legal jeopardy or bankruptcy and the entity is dissolved, just call the ATF and have them pick up your stuff.
    While financial issues with an existing entity is another good reason to go the trust route, the ATF won't come "pick up your stuff." That isn't how bankruptcy works. If the entity is liquidated, business assets, including NFA items, will be sold to pay its creditors (and another qualified person or entity - like a trust owned by you - can buy them, which I would imagine is more than likely given the limited market for NFA items). If the entity is reorganized instead, it can often retain many of its assets.

    Bankruptcy can happen to people, too. If you're really worried about financial issues down the road talking to a competent lawyer about a well-thought out estate plan, including a trust, is a good idea because it can protect a lot of your assets from creditors and bankruptcy while still giving you their full use.

  9. #39
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    ............
    Last edited by dbrowne1; 11-29-10 at 22:21.

  10. #40
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    Quote Originally Posted by Jay_Cunningham View Post
    If you are the sole owner of an LLC, can you form a trust this way?
    In Pennsylvania, if you have an LLC you can use that, but I believe there are some additional requirements to use the LLC to obtain SBRs and the like. I could be mistaken on the last part.

    The reason people use trusts is because they can be free and don't need to be registered with the government. This is not the case in all states, or maybe even a majority of states. There is also some changes to how you file taxes, but you already know this.

    If I formed a trust to get an SBR or similar item, I would absolutely have a lawyer specializing in it set up the paperwork. If the only thing between me and prison is a piece of paper, that piece of paper needs to be in order.

    Oh, I'm not a lawyer and this is not advice. This is how I understand it to work in Pennsylvania.

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