As for the issue ofparty'squalificationofshareholder's right trust, the authorholds that settler must be theholderof shares i. e. shareholderorhislegalgrantor.
Back in the heyday of using trusts for shifting income, if a trust contained one of those powers, like the power of the grantor to withdraw property from the trust and replace if with property of equal value, someone who thought the trust was being used to shift income, would consider that power to be a defect.
The ruling also applies to special kinds ofgrantor trusts, such as a generation-skipping trust, which is designed to avoid taxes at the grantor's children's deaths, as well as a grantor-retained annuity trust, where the grantor can transfer any amount of property betting that it will grow faster than the payments he is required to receive back from the trust over a period of years.
And it says that if the trustee has the ability, but not the obligation, to repay the grantor for the income taxes that the grantor pays on behalf of the trust, then the trust assets will generally not be included in the grantor's estate.