NFA transfer between LLC and a Trust.


PDA






Acera
April 22, 2010, 04:01 PM
I am thinking of starting a NFA trust, and letting the LLC I currently have die a quiet death. Not going to continue to do business after the start of 2011 under that company and would like to know the procedure for basically transferring Class III items from the LLC to a trust.

Will I have to pay another stamp tax?

Is there an easy way?

If you enjoyed reading about "NFA transfer between LLC and a Trust." here in TheHighRoad.org archive, you'll LOVE our community. Come join TheHighRoad.org today for the full version!
GonHuntin
April 22, 2010, 05:00 PM
Not 100% certain, but I believe if the Trust and the LLC are formed in the same state, you will only have to pay for one stamp........if they are in different states, you would have to transfer from the LLC to a dealer in the Trust state and then from the dealer to the trust.......requiring 2 stamps.

CoRoMo
April 22, 2010, 05:29 PM
Will I have to pay another stamp tax?

Technically, the trust will have to purchase a tax stamp, but yes, a tax stamp for each transfer of ownership.

Easy way?

That depends on what you mean. It might be easier to pay a lawyer to draft the new trust, but it is cheaper to buy Quicken WillMaker and do it yourself. A lot of folks will nearly wet themselves on the subject of a DIY rev. living trust, and warn you all about the one guy on AR15.com who's sloppy trust was found to be invalid by the ATF and he was caught in a precarious situation, but if you put forth the effort and do it right, you're good to go for the price of the software (~$15).

Jim K
April 22, 2010, 05:52 PM
I would not depend on any general advice or software on this one. BATFE has their own rules and what applies to other corporation property might not apply to NFA firearms. I suggest writing to BATFE and ask them specifically what needs to be done. You (the trust) may have to pay for a tax stamp, but that is better than guessing and finding out you have guessed wrong. Quicken will not get you out of jail.

Jim

TexasRifleman
April 22, 2010, 05:59 PM
Honestly I think Jim Keenan is right. A transfer of property between 2 non-human legal entities? I'd have to go with lawyer on that one, 100%.

No way I'd try that myself. May be tax issues too if there is profit/loss etc involved, I dunno. Too many chances for amateur errors it seems to me.

GrimmLV
April 22, 2010, 06:05 PM
http://www.guntrustlawyer.com/

I used these guys, and am very happy with the results. Yes, it was spendy, but being able to call them any time with questions, and being able to sleep at night makes it worth it to me.

Regards,

Grimm

Jim K
April 22, 2010, 06:12 PM
A big problem in those areas is that 99.99% of lawyers have only a vague idea that there even is an NFA or what it involves. And, as has been noted several times on these sites, even reading the law and the regulations is no help since BATFE often operates on a ad hoc or case-by-case basis, like the outfit they were once part of, the IRS.

So I wouldn't even trust a lawyer to get the straight scoop unless he is himself going to write to BATFE. If a lawyer advises you wrong, he won't go to jail for you either, he will just want more money to defend you.

In fact, you could even get advice from BATFE and later have some agent say it is wrong - incredibly, that has happened. That is why is it very important to get any firearms ruling directly from BATFE HQ in Washington, not from a local office or a local agent.

Jim

TexasRifleman
April 22, 2010, 06:17 PM
So I wouldn't even trust a lawyer to get the straight scoop unless he is himself going to write to BATFE. If a lawyer advises you wrong, he won't go to jail for you either, he will just want more money to defend you.

Agreed, get an ATF opinion but I'd still have a lawyer involved. He's not just creating a new legal entity he's moving property from one to another. That is something I'd want help on if it were me.

CoRoMo
April 22, 2010, 06:32 PM
I simply don't believe there's a way to transfer this ownership without a new tax stamp. I'm certain that a letter to the bureau will be answered that way. But even if they said no stamp was required, I'd buy one anyway and I wouldn't believe a word of that letter. Keenan's right, you can hardly believe the word of the ATF, and few lawyers will know the ins and outs here.

medalguy
April 22, 2010, 06:38 PM
ATF agents have been known to give erroneous information more than once. I for one would not do an NFA trust myself even though I slept at a Holiday Inn recently. Some things, like brain surgery and trust formation, are best left to the professionals. Just my .02

The transfer should be straightforward between the LLC into the trust on a Form 4. A transfer tax will be payable on every item transferred every time it is transferred or sold.

DoubleTapDrew
April 22, 2010, 07:15 PM
Definitely have a lawyer get involved and contact the ATF for the appropriate paperwork.
I wonder if it would be possible to do something like this on a Form 5 (tax exempt), again a question for ATF.

CleverNickname
April 23, 2010, 12:05 AM
You don't need a lawyer, jeez. The trust and the LLC are two separate legal entities. It doesn't matter that you may be both the managing member of the LLC and a trustee or grantor of the trust, they're still separate legal entities. I'm going to assume that the LLC isn't licensed as an FFL/SOT and that they're both incorporated/created in the same state. If so, then it would be a taxed form 4 transfer between them. No dealer needs to be involved.

You can't do a form 5 transfer, those are only to/from LE agencies or from the estate of a real person who's died.

Acera
April 23, 2010, 12:14 PM
Thanks Guys,

Now just have to asses the costs of keeping the LLC in business vs. $200 times the current inventory. Once it was exciting waiting on a transfer to come through, this time it looks like that will not be the case, LOL.

Bartholomew Roberts
April 25, 2010, 01:36 PM
At a minimum, you are going to need a new tax stamp for the transfer. My main areas of concern here wouldn't be ATF but IRS. There are probably tax implications involved in the transfer that have to be correctly reported and between the state sales tax, state franchise tax, and federal income tax, you've got several different layers of possible missteps and subsequent fines and penalties. The higher the value of your NFA inventory, the more you need to think about this.

In forming a trust, the big issue is how many people are involved and how many of them have or may have an incentive to sue you or the trust. A large, valuable NFA inventory creates more lawsuit potential than a single .22LR suppressor. The smaller the number of people involved and the smaller the value of property, the easier it is to rely on a form/software. This is the one big advantage of the LLC, it is always going to be one person. In a trust however, you have a minimum of at least two parties due to the nature of a trust.

Typically, you will be the settlor (person who gives property to the trust) and trustee (person who controls/manages trust property). So the issue you want to consider carefully is who is your beneficiary? If it is a spouse, you need to consider what might happen in the event of divorce, which is an area most form trusts handle poorly or not at all. It is relatively simple to create legal problems for yourself with a form trust; however, most people will never realize they created a potential problem because it will never end up in court to begin with. If you are not comfortable with that level of unknown risk, then you need to talk to a lawyer who can devise a trust to meet your need. This is even more true if you have a substantial value of NFA items or wish to add other property to the trust.

dukeofurl
May 3, 2010, 02:51 AM
The above linked blog relects the OPPOSITE of my experience.

Just scrolling through one of the recent blog posts - I'll reference below what I have an issue with.

--------
Funding your NFA Gun Trust Properly
If a NFA Trust or Gun Trust is not funded, it does not exist. It's important to have a trust funded for it to exist. This is one of the reasons ATF requires an Schedule A or Assignment Sheet. This shows that there are assets in the trust. Many Trusts are rejected by ATF as invalid because of their appearance of being invalid by not having any assets. Many states do not have a requirement to include a list of assets with the trust or even proof that it has been funded but ATF has a checklist and will not approve a transfer to a trust without including a Schedule A or Assignment to the trust. If you trust was rejected by ATF and would like to know why, we and our network of over 100 lawyers can help you determine what needs to be done to your trust and if there are problems with the design of your trust in regards to NFA firearms.
-----------

When I sent in my trust paperwork, I did not attach a schedule A or a list of assets the trust had.

Reason: IT DIDNT HAVE ANYTHING IN IT! My trust was assetless the day I sent in the papers to transfer my NFA item to it, whereupon an approved transfer would make the sole asset of the trust the NFA item itself. Confusing huh?

Why I disagree with the attorney's representation of "fact" - the blog post says that assets have to be in trust for it to be valid, but if you are just starting out you run into a recursive situation quickly.

I think they're writing stuff on the blog for the sake of writing stuff on a blog.

My .02.

rfurtkamp
May 3, 2010, 03:24 AM
You can assign other property to the trust to give it an asset from creation.

A dollar, a paperclip, a piece of paper, a pair of scissors, you get the idea.

Bartholomew Roberts
May 3, 2010, 07:17 PM
Why I disagree with the attorney's representation of "fact" - the blog post says that assets have to be in trust for it to be valid, but if you are just starting out you run into a recursive situation quickly.

Put the money you are using to purchase a suppressor into the Trust as an asset of the Trust (check your local laws first to be aware of any tax issues or legal issues).

Just as an aside, when you get into large enough amounts of money, you need to be very conscious of the tax consequences of how and when you fund trusts or LLCs. Depending on your state laws, you may not hit that mark with some SBRs or suppressors; but if you start adding multiple machineguns, you should really seek out some tax advice on how to fund your trust or LLC without creating negative tax consequences.

There are a lot more IRS agents than there are ATF agents out there ;)

Gun Trust Lawyer
May 14, 2010, 08:34 AM
It doesn't matter who pays the $200. There is no restriction on who can pay the tax or the transfer of the money. They only restriction is on the transfer of the Title II firearm.

If you are transferring items subject to the NFA you from a LLC to a Trust or another company, or an individual you will have to pay another fee of $200 or $5 for an AOW.

Also whey you put money in the trust, as has been mentioned, it is funded. Therefore when you purchase the Title II firearms, there the trust exists and the ATF's subsequent transfer to a valid trust.

guntrustlawyer
June 28, 2010, 12:33 AM
You will need an approved ATF form 4 to transfer each NFA item from your LLC to your gun trust and must pay the $200.00 tax per item transferred. There is no other way to accomplish this type of transfer. I customarily use a bill of sale to document transfers of weapons into a gun trust, but a form 4 will serve the same purpose.

If you enjoyed reading about "NFA transfer between LLC and a Trust." here in TheHighRoad.org archive, you'll LOVE our community. Come join TheHighRoad.org today for the full version!