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Petitioners simply restructured the form in which they held their
property. Rearranging title is not related to management or
conservation under section 212. Zmuda v. Commissioner, 731 F.2d
at 1422. Moreover, section 212 was not designed to allow tax
deductions based on mere preservation of net worth. Id. Thus,
respondent could, and did, properly disallow the expenses the
trusts claimed.
B. Assignment of Income
The assignment of income doctrine provides a second and
broader-based attack on family trusts of the type described here.
Schulz v. Commissioner, 686 F.2d at 493. Petitioners provided
services to P.I. Ministries. P.I. Ministries paid the OMK
Company Trust for those services, and the trust reported that
income on its Form 1041. It is established law that income is
taxed to the person who earns it. Commissioner v. Culbertson,
337 U.S. 733, 739-40 (1949). Attempting to avoid taxation by
diverting income from the true earner to another entity does not,
in and of itself, shift the incidence of taxation. United States
v. Basye, 410 U.S. 441 (1973); Lucas v. Earl, 281 U.S. 111
(1930). The determination of the proper taxpayer depends upon
which person or entity in fact controls the earning of the income
rather than who ultimately receives the income. Vnuk v.
Commissioner, 621 F.2d at 1320; Vercio v. Commissioner, 73 T.C.
1246 (1980).
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