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financial performance. Petitioner had a wide variety of duties
including serving as Midwest's president and salesman.
Kim and Denise Martin (Martins) are certified public
accountants and have been petitioners' tax advisers since 1982.
The Martins prepared all of petitioners' tax returns from 1982 to
date, and the Martins maintained petitioners' books and records
for each of the subject years.
Introduction to the Multitrust Scheme
In early March 1994, petitioner met with a financial
planner, James Myers (Myers). Myers was a representative of
Heritage Assurance Group (Heritage), an entity that promoted
multitrust schemes as a means to avoid paying taxes. Myers
introduced petitioner to Heritage's scheme, which worked
generally as follows. An individual transfers his or her assets
and right to receive income to a newly created family trust in
exchange for a certificate of beneficial interest (CBI). A CBI
gives the individual the right to receive any distributions that
the trustee, who is the same as the transferring individual,
decides to make. The family trust pays and deducts all of the
trustee's personal expenses and distributes any excess corpus to
a charitable trust created under the scheme. The individual
creates other trusts to circulate funds among and between.
Myers presented petitioner with promotional materials
containing flowcharts and explanations detailing the above
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