Rost v. USA, No. 21-51064 (5th Cir. 2022)
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Plaintiff formed the Enelre Foundation as a Stiftung under the laws of Liechtenstein. Stiftung is a German word meaning, roughly, “foundation” or “endowment.” Enelre’s purpose is to provide education and general support for Plaintiff and his children. Plaintiff transferred $3 million to Enelre’s bank accounts. He later learned the IRS would consider Enelre a “foreign trust,” triggering certain reporting requirements. Plaintiff belatedly filed the reports, and the IRS assessed penalties. Plaintiff paid the penalties and then filed this refund action. The district court granted summary judgment for the government.
The Fifth Circuit affirmed. The court explained that the district court correctly found that Enelre qualifies as a foreign trust. Its organizing documents explain that Enelre’s purpose is to support its beneficiaries and limit its transactions to pursuing and realising its purpose. This is characteristic of an ordinary trust. The documents also prohibit Enelre from conducting commercial trade. Liechtensteinian Public Registry filings confirm this prohibition. Enelre’s familial purpose, lack of business objective, and bar on commercial activity render it a trust. Enelre’s form of organization confirms it is a trust. Enelre is subject to Liechtenstein’s “Act on Trust Enterprises.”
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