WY statutory trust for exemption of CA franchise tax

[Tina Lee]

I'm a WA resident and own one property in CA.  Anderson Advisors has formed a WY Statutory Trust for me for my property in CA.  I don't know what to do next.  My property manager is still taking out Franchise tax monthly and I'm neg negative $200/month and I don't know what to show them to stop them from taking that franchise tax from my proceeds.

1) Do I have to put my property to my WY statutory trust as I do with my other state properties to their LLCs?  Or does the WY statutory trust hold the property as it is?  I read the agreement and my CA property is in the trust agreement.

2) I asked Anderson Advisors what I can show/do to make my property manager stop taking out CA franchise tax monthly and they told me to fill out form 590.  However, on that form, there's no option for a trust as a reason for tax exemption.   Anyone know how to fill the form out?

I would really appreciate any step by step instructions/guidance on this.  Thanks!

[Katie Balatbat]

@Tina Lee

The lengths that people go to avoid the $800 fee still surprises me.  An annoying fee, yes, and eats into cash flow and profits which is why you likely started on this endeavor, but the lengths people go to try to avoid what is, in the end, only $800 seems excessive sometimes.

So, we don't have all of the facts or copies of any documents here, but generally, a trust only governs any assets that it owns.  If the trust mentions the real property, but you never actually transferred ownership of it into the trust, likely the trust terms don't govern it yet.  Did Anderson help you with a deed of some kind to actually transfer ownership of the real property into the trust?

Additionally, did you go over with Anderson how the WY statutory trust is taxed in California? Depending on how much money you're making (which, if you're at a loss, may not be a ton), those trusts can sometimes cause more tax than going the standard LLC route and just paying the $800 in the first place.

I'm not sure from your post if you're talking about income taxes that are owed, or the $800 LLC fee, which is more akin to a franchise fee in the terminology that you're using. Do you mean Franchise Tax Board? If so, you mean income tax? California will generally tax any income earned in its state and sourced to its state. I would suggest pushing further on Anderson on how to fill out the form and what to submit, and for presumably the high fees that you have paid them, they should be able to help further. It may be that you are not exempt from any CA income tax withholdings. You can also consult with your tax preparer.

*This post does not create an attorney-client or CPA-client relationship.  The information contained in this post is not to be relied upon.  Readers are advised to seek professional advice.