Ownership Question - Why can't we register NFA item in dual title?

[Paul in PA]

This may seem like a silly question, but as I get older it has popped into my head. Not really a Thompson question, but this forum is one of the nicest group of folks that enjoy the Thompson and Class III world. I don't think I have seen any nastiness like other forums sometime have.

 

So here is my ownership question: What can't a husband & wife, father & son, or two friends have joint ownership of a NFA item. I know just form a NFA trust. Well I currently own only my Thompson and do not expect to purchase more NFA items, besides the NFA trust terminates at death. Very few items on my Class III wish list and most of the items on the registry would be nice to shoot one or twice, but not buy. So unless I am present, my son can't take the Thompson to the range.

 

If the Form 4 registration is a Tax Return, then why is a Joint Return not allowed? We can file Married with our spouse?

 

You can own a house or a car with multiple folks on the deed or title?

 

Because that's how the Federal Government designed the Form 4 transfer process. I strongly doubt, the GCA of 1934 said single ownership on the Form 4 transfer, but that is how it as evolved. I know it is a quirk of the Federal Government, I understand I have been either in military or work as a Federal employee for almost 37 years.

 

Just had to ask. We have seen so many executive orders signed in the last days of Obama and first week of Trump. Today we see laws, like the Affordable Care Act, with thousands of pages of written words; but most likely the GCA was only a few pages long. It is really up to the implementing agency to bring the law into reality and enforce. Thanks

 

 

[Black River Militaria CII]

Couple things to note. The law regulating MGs, AOWs, SBRs, etc was the National Rirearms Act of 1934, not the GCA. GCA of 68 enacted mote regulations, but the initial regulatory frameswork was the NFA '34. The transfer tax is an excise tax, an indirect tax, originally directed to be paid by the transferor, but usually paid by the buyer. The function of the tax when legislated was to make acquisition of the specific firearms expensive and to impede legal transfer and possession of the regulated firearms once the regulatory system had been enacted. It was a repressive tax designed to make MGs, etc too expensive to own. Of course, it didn't affect illegal acquisition of MGs at all! The transfer application is not a "tax return" but is more like a receipt indicating that the tax has been paid for the service provided, which is the processing of the information required to be archived concerning the controlled article, it's identification, and the former and new owner of the article. Legally, the named registrant has full responsibility for the safe control of the firearm at all times.
Multiple registrant's on a transfer application would create huge problems when the next transfer application is filed as all legal registrant's would be required to sign the application. What if one didn't want to sign, or was no longer alive or could not sign for any number of reasons. Even with only one registrant, there can be difficult issues with transfer to a new registrant due to deceased owners, MGs registered to unknown persons who have given the gun to someone else and who cannot be found, etc, etc. Multiple registrant's would not be viable for other reasons as well.
Two methods of registered possession allow the legal responsibility to be shared with other persons: trusts and corporations.

I'm sure others will have more observations.
FWIW

Edited January 28, 2017 by Black River Militaria CII

[dalbert]

Black River Military CII,

 

Very insightful reply. Thank you for posting it.

 

David Albert

dalbert@sturmgewehr.com

[TD.]

Paul in PA & Black River Military CII,

 

I agree with David. An excellent question and answer. Thank you both for posting.

 

I suggest this thread be attached to or noted by the reference section of the Board.

 

TD.

[Chromebolt]

Why do you think the NFA Trust terminates at death? The trust owns the weapon and as long as there are trustees the trust should continue.

[dalbert]

I have added it to the reference thread list.

 

David Albert

dalbert@sturmgewehr.com

[AlexanderA]

Interesting question.

 

A lot of people seem to think that a Form 1, a Form 4, etc., is a "certificate of title" such as we have with motor vehicles. (That's why, for example, you hear of a gun being "on" a Form 4.) This is completely incorrect. NFA forms are transactional in nature. They relate to a specific transfer or making. The national registry is not a title repository.

 

The NFA is concerned with physical possession, not ownership. The current popularity of trusts has muddled this distinction.

[Paul in PA]

Thanks for the answers.

 

- Sorry for the confusion on which firearms law established the tax.

- Second to answer the question on an NFA trust. The lawyer, who "Specializes in NFA Trusts", I was talking with in Pennsylvania say that the trust he establishes terminates at the death of the primary "Trustee" and it transfers back to the original owner. Did not sound right, $200 NFA transfer to the trust plus $750 to the lawyer for the trust is not worth it for a single Thompson. Sounding more like a partnership, since when one partner dies the partnership dissolves.

 

I am assuming, that I will either transfer the Thompson through my estate when I die or I will just pay the $200 to transfer it too him when I get too old to go to the range with him.

 

Again thank Black River Militaria CII on what the $200 transfer tax is and how it works.

 

So Officers or is the term Trustee of the NFA Trust can possess the Class III items that the Trust owns?

[TSMG28]

An alternative to an NFA Trust is a corporation that owns the NFA items. You can have as many "officers" of the corporation as reasonably necessary, and ownership of the corporation can transfer automatically at death.

 

I realize that in some states a corporation is an expensive option, but in Ohio it is very inexpensive. I set mine up before trusts were common because I couldn't get a CLEO signature, and it has served me well for both ownership and inheritance. With the new NFA rules, all responsible parties will need to undergo background checks.

 

FWIW

 

Roger

[Chromebolt]

The lawyer with whom you spoke needs to offer you options on trusts. Or seek out another lawyer.

 

The trust can be written many ways. I set up a trust with me, my wife and my daughter as trustees. I'm not going to pay the tax stamps to transfer my NFA items into the trust. The trust has been funded to the tune of $10 (makes it a legal entity) and upon my death my NFA items will be put into the trust (no $220 fee on each item necessary).

 

Then my wife, daughter and whatever trustees are added (there is a mechanism for doing this) will be able to possess the NFA items. There are contingencies for anyone predeceasing me or should we die together. .

[TSMG28]

Chromebolt makes an excellent point. Trusts can be configured in many different ways. They may be more expensive to set up initially, but if structured correctly, they can adapt to almost any requirements.

[bug]

The lawyer with whom you spoke needs to offer you options on trusts. Or seek out another lawyer.

 

The trust can be written many ways. I set up a trust with me, my wife and my daughter as trustees. I'm not going to pay the tax stamps to transfer my NFA items into the trust. The trust has been funded to the tune of $10 (makes it a legal entity) and upon my death my NFA items will be put into the trust (no $220 fee on each item necessary).

 

Then my wife, daughter and whatever trustees are added (there is a mechanism for doing this) will be able to possess the NFA items. There are contingencies for anyone predeceasing me or should we die together. .

 

Just curious. How do your items transfer tax free to the trust upon your death?

 

Bob D

[Black River Militaria CII]

Transfers to legal beneficiaries are tax exempt.

[johnsonlmg41]

Chromebolt. That is not how it works. If the item is not titled to the trust now it will not transfer into the trust tax free upon your death. It will transfer to one (and only one) of your heirs tax free. If you want them to have shared usage now or after your death you will need to transfer it (200 tax paid) into the trust. A trust or any legal entity (there is one exception) does not qualify as an heir per definition but a legatee or devisee. At a later date if one of the trustees decides they want the item titled to them specifically or they wish to dissolve the trust another tax paid transfer will be required.

 

 

I probably should clarify that a trust can own an NFA item or have it listed at any time as an asset, but possession is limited to whomever or whatever entity is listed on the ATF form. If the trust is not listed as the transferee on the form then it can go tax free transfer only directly to an heir, it can't transfer tax free to a trust (because a trust can not be a legal heir) In the future we're going to see a lot of NFA items at risk due to transfers to trusts as they dissolve, trustees (responsible persons) have issues, trust language for one state may not work in another, and other trusts that are not legally valid. Not really a fan of the trust unless your assets exceed 10 mil. where lawyers get serious about defending them when fees make it worthwhile. No one is going to defend your free gun shop, or $300 mail order trust if it's challenged.

Edited January 29, 2017 by johnsonlmg41

[wwiifirearms]

Trust laws vary by state, but most will survive for some time after the death of the Grantors. In my case 20 years after death of the last grantor. I can add or remove trustees at anytime. Upon the death of the grantors, my wife and I who are also trustees, my children become trustees if they are qualified. If not qualified another trustee is appointed until they are qualified. Additionally I have given the trustee the ability to determine if my children are ready to take on control of the assets. They might be legally qualified, but maybe still not responsible enough.

 

Trusts can be created to do many things, including shared ownership. The trust spells out who can add or remove assets and if they need approval from other trustees.

[wwiifirearms]

PS - you need a lawyer that really knows NFA trusts, not just a trust lawyer. Joshua Prince in PA or David Goldman in Florida or Derek DeBrosse in Ohio are all good options and they work with lawyers in other states.

[mnshooter]

Chromebolt. That is not how it works. If the item is not titled to the trust now it will not transfer into the trust tax free upon your death.

 

Thought this sounded too good to be true.

 

And, there is no such thing as an "NFA Trust". It's a trust that happens to contain NFA items.

[Chromebolt]

Johnson, you're correct. I worded my response incorrectly. At my death, my heir will get the items tax free. They will then transfer to the trust per our conversations. Tax fees will accrue on the trust transfer.

 

But you certainly don't need tremendous assets to make a trust worthwhile. Avoiding probate, capital gains on trust stocks, limiting assets in case of lawsuits, etc can make them beneficial. But do consult an attorney for the trust to tailor make it for your needs.

[wwiifirearms]

The term "NFA Trust" has merit. While not a legal term it is worth noting that a trust intended to own NFA items requires specific features not found in a typical trust someone might create for other assets. For example it needs to deal with ensuring a disqualified person cannot become or remain a trustee. The ATF can deny a transfer to a trust if it doesn't meet certain standards, even though it might be a legal trust for other purposes.

[mnshooter]

The term "NFA Trust" has merit. While not a legal term it is worth noting that a trust intended to own NFA items requires specific features not found in a typical trust someone might create for other assets. For example it needs to deal with ensuring a disqualified person cannot become or remain a trustee. The ATF can deny a transfer to a trust if it doesn't meet certain standards, even though it might be a legal trust for other purposes.

 

Alternative fact noted.

 

 

I could have better explained my reference was towards the ATF/NFA, which happily has no direct involvement in the trust.

[reelbusy2]

Why not use an LLC? Inexpensive and you can have multiple members and managers and an infinite life.

 

A Colorado LLC, for example, costs $50 to create, $10 year for annual report. All online.

[AlexanderA]

Corporate ownership raises an interesting question. The NFA item is registered to the corporation, a "legal person." The natural persons actually in possession of the item are merely acting as agents of the corporation.

 

Since the corporation has a life of its own, separate and apart from the natural persons who control it and own shares in it, it would seem that the shares could be transferred (sold) without affecting the NFA registration. No transfer of the gun has taken place. It's still owned by the same corporation.

 

Tell me why, once an NFA item has been placed in corporate ownership, it could not be "sold" by selling the underlying corporation. Set up a separate corporation for each gun. Once the ATF approves the transfer into that corporation, there would be no need for further ATF involvement -- forever. Just transfer the shares of the corporation.

[wwiifirearms]

I've had the same thoughts on a Corporation. I think some of the potential issues depend on the State in which you are incorporated. Some states will require annual tax returns or other annual filings. What would happen if you failed to file and the corporation was dissolved?

It is an interesting question.

[johnsonlmg41]

I have a lot of stuff in a couple llc's. Been doing it for years for a number of reasons. I don't know of a state that doesn't have an annual fee and AFAIK they all require some sort of annual report, though the states I'm in it's all done online as is the fee payment. Many states require a physical presence of some sort be it you and your address or an instate agent for various logical reasons. Corporations don't automatically dissolve (in fact it's a whole process) but if you don't pay there WILL be issues at some point. Should you choose to dissolve, you would need to register (transfer) the item somewhere else before dissolution or it will be in legal title limbo and at some point you'd loose control of it. Corporate ownership has gone on since MG's were invented and many were registered right away in 1934.

 

I'm reading Helmer's book and there was never any mention of the paper trail of Thompsons during the transition thru the NFA? Were they all grandfathered? Did Auto- Ord get a mfr license and they got put in under that? Not even sure when a mfr. license was invented yet? Pre or post 34'? Or was it ignored for certain people, unless you were a bad guy and got caught with an unregistered item? Course just like today, many gangsters of yesteryear stole them so effectively nothing has changed up til today. We are still demonizing the guns and legal owners, and letting the crooks run rampant.