Marcus Has Been Determined to Be a Grantor Trust by the IRS

question 138

Essay

Marcus has been determined to be a grantor trust by the IRS. Your partner explains that this probably happened because the donor of the trust assets retained excessive powers over the operation of the trust or the use of its assets and income. To what powers is your partner referring?

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Definitions:

Put Premium

The cost associated with acquiring a put option, allowing the holder to sell an asset at a stipulated price within a specific timeframe, offering protection against asset depreciation.

Put Options

Financial contracts granting the holder the right to sell an asset at a predetermined price before a specified date.

Call Options

Financial contracts giving the buyer the right, but not the obligation, to buy an asset at a specified price within a specific time frame.

Underlying Asset

The financial instrument upon which derivative contracts, like options and futures, are based.