<table><tr><th>From:</th><th>Harry Beller &lt;</th></tr><tr><td>Sent:</td><td>Wednesday, February 13, 2013 3:45 PM</td></tr><tr><td>To:</td><td>Jeffrey Epstein</td></tr><tr><td>Subject:</td><td>Fwd: Sales tax - defective grantor trust</td></tr></table>

Jeffrey

This is the response that I received from Drew. How should = respond? Are there any documents that I can send =im

Harry

Begin =orwarded message:

Email Metadata:

*   From: Drew Benenson
*   Date: February 13, 2013, 0:39:54 AM EST
*   To: Harry Beller
*   Cc: Rich Kahn

Subject: RE: Sales tax - defective grantor =rust

Harry,

Please send me the documents relating to the trust =o I can review3 them.

Thank you.

Drew

Drew Benenson, C.P.A.
Tarlow & Co., C.P.A.'s

7 Penn Plaza

Suite 210

New York, NY 10001

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From: Harry Beller I Sent: =ednesday, February 13, 2013 10:29 AM To: Drew =enenson Cc: Rich Kahn Subject: Fwd: Sales tax - =efective grantor trust

Drew

=nbsp;

This is the response =hat I received from Mr Epstein with respect to your =emo.

Please answer his point

thanks

Harry

## Subject: Re: Sales tax - defective grantor =rust

the most important fact is missing =rom this analysis is that he settlor , has the right to reaquire assets =ith out the consent of th trustees, it is a right of =ubstituion, therefore he is only acting as settlor , of the =rigianl trust, he has the right to take back what was put in, =nitially, like a warranty,

On Wed, Feb 13, 2013 at 11:17 AM, Harry Beller =lt;[REDACTED] =gt; wrote:

Jeffrey

Below is the opinion from Drew Benenson of Tarlow =amp; Co. The conclusion in this memo is that an exchange of art for =tock under a substitution clause in a defective grantor trust is =ubject to NY sales tax.

Attached is the memo that I sent Drew to review =uggesting some authority to avoid the sales =ax.

Begin=forwarded message:
From: Drew Benenson <  >
=div>
Date: February 12, 2013 3:39:20 PM =ST
To: Harry Beller <  >, Rich Kahn
Subject: Sales tax

Harry,

## Subject: Re: Sales tax - defective grantor =rust (cont.)

Below is the summary we =eceived from the attorney. Let me know when you want to =peak.

Thank you.

Drew

The memorandum Drew =enenson asked us to review looks at two issues with regard to the sales =ax consequences of a proposed transfer of art from a (defective) =rantor trust to the grantor, apparently in exchange for stock of the =rantor. The issues are: (1) whether a grantor trust =disregarded for federal income tax purposes) is recognized as a =eparate entity for sales tax purposes in a transaction with the =rantor; and (2) if so, whether its existence could be disregarded =nstead on a common-law alter-ego theory.

The memo correctly =oints out that there is no direct guidance on the sales tax obligations =f grantor trusts. However, ample authority does exist with =espect to other federally disregarded entities-namely, single-member =LCs (SMLLCs)-and it confirms that New York considers an entity's =disregarded" status for federal income tax purposes to be irrelevant =ith respect to its sales tax obligations. Numerous rulings have =ound SMLLCs subject to sales tax obligations, whether in transactions =ith third parties or with their sole member. See, e.g., Arthur =nderson, TSB-A-99(7)S, Jan. 28, =orporation-were 1999 (ruling taxable that retail leases sales of on tangible which the =roperty SMLLC between was obligated a federal =o collect disregarded tax); M SMLLC Ventures, and its LLC, sole TSB-A-04(11)S, member-a C April 27, 2004 (ruling =hat aircraft leases between two SMLLC's owned by the same single member =ould be subject to tax but for an exemption for certain commercial =ircraft).

The memo cites several New York rulings involving =ransactions among affiliated entities (including SMLLCs). The =epartment qualified its findings in those rulings by noting that the =nalysis presumed that the affiliated companies didn't "so dominate the =ffairs" of one another to be considered mere alter-egos of each other =nder common-law tests. But this language alone does not indicate, =s the memo suggests, that the mere structure of a defective grantor =rust obligates the Department to disregard the separate legal existence =f the trust and the grantor in a transaction between the two. In =act, similar language appears in numerous other sales tax rulings =nvolving complex corporate structures and their sales tax =onsequences-be it C corporations, partnerships or SMLLCs. Like an =ndividual, any trust (acting through its trustee) is, by statute, =onsidered a "person" subject to sales tax obligations under Tax Law § =101(a).

More critically, the doctrine of piercing the corporate =eil (which the memo concludes could work to eliminate the tax here) is =ot one a taxpayer may generally invoke to avoid unfavorable tax =onsequences. As the Appellate Division has held: the =asserted right" to pierce the corporate veil "is not usually invoked by =he stockholder but by one claiming against him and seeking to avoid the =erpetration of a fraud under the cover of the corporate veil." =nbsp;(Orda v State Tax Commission, 25 A.D.2d 332, affd, 19 N.Y.2d 636). =nbsp;ln fact, New York's Court of Appeals stated in Morris v. New York =ept. of Taxation & Fin., 82 N.Y.2d 135 (1993) (a sales tax case) =hat:

While complete domination of the corporation is the key to =iercing the corporate veil, especially when the owners use the =orporation as a mere device to further their personal rather than the =orporate business, such domination, standing alone, is not enough; some =howing of a wrongful or unjust act toward plaintiff is required. 82 =.Y.2d at 141-42. (emphasis added) (citations omitted).

Here, the =rantor trust was ostensibly set up for legitimate business and/or =state planning purposes. Therefore, New York's position with =egard to any transaction between the trust and its grantor would =eflect the widely applied concept that a taxpayer must bear the sales =ax consequences of its chosen form of doing business. As stated =y the Appellate Division, "the choice of form [does] not rest with the =ax authorities but with the taxpayer. If he unfortunately chose a =orm which was taxable instead of an equally available form which was =ontaxable, he must bear the consequences." (Sverdlow v. Bates, 283 A.D. =87, 491; see also 107 Delaware Associates et al. v. State Tax Comm'n, =9 A.D.2d 29 (1984); Commissioner of Internal Revenue v. Moline =roperties, Inc., 131 F.2d 388 (1942).

Drew Benenson, =.P.A.

4

## Subject: Re: Sales tax - defective grantor =rust (cont.)

Tarlow & Co., C.P.A.'s
7 Penn Plaza =uite 210
New York, NY 10001
Tel - ███████████████████-8540>
Fax - ███████████████████-6805>
E-ma███████████████████

This =lectronic mail transmission may contain confidential or privileged =nformation. If you believe that you have received this message in =rror, please notify the sender by reply transmission and delete the =essage without copying it or disclosing it.

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