HOUSE_OVERSIGHT_022355.jpg
1.59 MB
Extraction Summary
5
People
4
Organizations
0
Locations
2
Events
1
Relationships
4
Quotes
Document Information
Type:
Financial strategy document
File Size:
1.59 MB
Summary
This confidential J.P. Morgan document, page 5 of a set from a House Oversight collection, illustrates the 'Economic flows of Cascading GRATs,' a complex financial and estate planning strategy. It models a hypothetical 5-year scenario where a $50 million initial investment is moved through a series of Grantor Retained Annuity Trusts (GRATs) to transfer wealth from a 'grantor' to a 'beneficiary', with calculations based on a 2000 Tax Court ruling. The document is for illustrative purposes only and does not name specific individuals involved in a transaction.
People (5)
| Name | Role | Context |
|---|---|---|
| grantor | Asset Holder |
A generic term for the person funding the Grantor Retained Annuity Trust (GRAT). In this model, the grantor makes an ...
|
| beneficiary | Trust Recipient |
A generic term for the person or entity who receives the remaining assets from the GRAT after the annuity payments to...
|
| insiders | Corporate Insiders |
Mentioned in a disclaimer regarding securities laws issues that should be discussed with advisors.
|
| Walton | Litigant |
Party in the Tax Court case 'Walton v. Commissioner', which is cited as the basis for the calculation.
|
| Commissioner | Litigant (likely IRS) |
Party in the Tax Court case 'Walton v. Commissioner'.
|
Organizations (4)
| Name | Type | Context |
|---|---|---|
| J.P. Morgan |
The creator of the document, as indicated by the logo at the bottom.
|
|
| IRS (Internal Revenue Service) |
Mentioned in relation to the 'IRS discount rate' used in the GRAT calculations.
|
|
| U.S. Tax Court |
Mentioned as the source of the 'Walton v. Commissioner' ruling, which the document's calculations are based on.
|
|
| House Oversight |
Appears in the Bates number 'HOUSE_OVERSIGHT_022355', suggesting the document is part of evidence or records for a co...
|
Timeline (2 events)
2000-12-22
A U.S. Tax Court ruling was issued in the case of Walton v. Commissioner (115 T.C. No. 41). The calculations in this document are based on this ruling.
A hypothetical 5-year financial strategy called 'Economic flows of Cascading GRATs' is detailed, showing the flow of funds from an initial $50 million investment between a grantor and a beneficiary.
Relationships (1)
The entire document describes a financial strategy where a grantor transfers assets to a series of trusts (GRATs) for the ultimate benefit of a beneficiary.
Key Quotes (4)
"Note: Assumes grantor survives all GRAT terms"Source
HOUSE_OVERSIGHT_022355.jpg
Quote #1
"Note: Model does not include income taxes; the ongoing income taxes generated by the trust are paid by the grantor, income tax implications should be carefully considered"Source
HOUSE_OVERSIGHT_022355.jpg
Quote #2
"Numbers have been rounded for convenience, are only estimates for illustrative purposes and should not be relied upon."Source
HOUSE_OVERSIGHT_022355.jpg
Quote #3
"Calculation is based on 2000 Tax Court ruling in Walton v. Commissioner (115 T.C. No. 41 (Dec. 22, 2000)."Source
HOUSE_OVERSIGHT_022355.jpg
Quote #4
Full Extracted Text
Complete text extracted from the document (2,211 characters)
CONFIDENTIAL
Economic flows of Cascading GRATs
Economic flows of Cascading GRATs
Example
Value of initial transfer to GRAT $50,000,000
IRS discount rate 1.60%
Number of GRATS 4
Length of strategy 5 years
Annuity rate 51.20%
Escalating annuity percentage 0%
Term of individual GRATS 2 years
Future IRS discount rate 1.60%
Note: Assumes grantor survives all GRAT terms
Note: Model does not include income taxes; the ongoing income taxes generated by the trust are paid by the grantor, income tax implications should be carefully considered
Note: Model assumes all annuity payments are made in cash
Value of initial transfer to GRAT $50,000,000
IRS discount rate 1.60%
Number of GRATS 4
Length of strategy 5 years
Annuity rate 51.20%
Escalating annuity percentage 0%
Term of individual GRATS 2 years
Future IRS discount rate 1.60%
Note: Assumes grantor survives all GRAT terms
Note: Model does not include income taxes; the ongoing income taxes generated by the trust are paid by the grantor, income tax implications should be carefully considered
Note: Model assumes all annuity payments are made in cash
Pre-tax annual return of asset
Year Return
1 15.00%
2 15.00%
3 15.00%
4 15.00%
5 15.00%
Year Return
1 15.00%
2 15.00%
3 15.00%
4 15.00%
5 15.00%
GRAT First Year
GRAT # FMV Appreciation Annuity
1 50,000,000 7,500,000 (25,601,587)
2 25,601,587 3,840,238 (13,108,825)
3 38,710,413 5,806,562 (19,820,960)
4 32,929,786 4,939,468 (16,861,096)
GRAT # FMV Appreciation Annuity
1 50,000,000 7,500,000 (25,601,587)
2 25,601,587 3,840,238 (13,108,825)
3 38,710,413 5,806,562 (19,820,960)
4 32,929,786 4,939,468 (16,861,096)
GRAT Second Year
FMV Appreciation Annuity
31,898,413 4,784,762 (25,601,587)
16,333,000 2,449,950 (13,108,825)
24,696,014 3,704,402 (19,820,960)
21,008,158 3,151,224 (16,861,096)
FMV Appreciation Annuity
31,898,413 4,784,762 (25,601,587)
16,333,000 2,449,950 (13,108,825)
24,696,014 3,704,402 (19,820,960)
21,008,158 3,151,224 (16,861,096)
Beneficiary's trust reinvests remainders
Year Balance Inflows FMV
1 0 0 0
2 0 11,081,587 11,081,587
3 12,743,825 5,674,124 18,417,950
4 21,180,642 8,579,456 29,760,099
5 34,224,114 7,298,286 41,522,399
Year Balance Inflows FMV
1 0 0 0
2 0 11,081,587 11,081,587
3 12,743,825 5,674,124 18,417,950
4 21,180,642 8,579,456 29,760,099
5 34,224,114 7,298,286 41,522,399
Grantor reinvests annuities
Year Balance Inflows FMV
1 0 0 0
2 0 0 0
3 0 0 0
4 0 36,682,056 36,682,056
5 42,184,364 16,861,096 59,045,460
Year Balance Inflows FMV
1 0 0 0
2 0 0 0
3 0 0 0
4 0 36,682,056 36,682,056
5 42,184,364 16,861,096 59,045,460
Numbers have been rounded for convenience, are only estimates for illustrative purposes and should not be relied upon. Corporate insiders should consult with securities counsel as to any reporting issues under Section 16 of the Securities Exchange Act of 1934 associated with receiving shares in-kind.
Note: Above example is for illustrative purposes only. These materials should not be construed as providing legal, tax or accounting advice. GRATs involve complex tax and, in the case of insiders, securities laws issues that should be discussed with your own advisors and company counsel. Annuity will be paid for full term to the grantor or, in case of the grantor's death, to the grantor's estate. Calculation is based on 2000 Tax Court ruling in Walton v. Commissioner (115 T.C. No. 41 (Dec. 22, 2000).
Note: Above example is for illustrative purposes only. These materials should not be construed as providing legal, tax or accounting advice. GRATs involve complex tax and, in the case of insiders, securities laws issues that should be discussed with your own advisors and company counsel. Annuity will be paid for full term to the grantor or, in case of the grantor's death, to the grantor's estate. Calculation is based on 2000 Tax Court ruling in Walton v. Commissioner (115 T.C. No. 41 (Dec. 22, 2000).
J.P.Morgan
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