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to control beneficial enjoyment of the corpus or income are
vested in the grantor or certain other persons. Sec. 674.
Fifth, certain administrative powers are exercisable by the
grantor or a nonadverse party. Sec. 675.
Adverse party is defined as “any person having a substantial
beneficial interest in the trust which would be adversely
affected by the exercise or nonexercise of the power which he
possesses respecting the trust.” Sec. 672(a). Even if the
section 672 definition of an adverse party is satisfied, however,
sections 674-677 require a trust’s income to be taxed to the
grantor unless the consent of the adverse party is required
before the grantor may exercise any of the powers enumerated in
those sections. Because petitioners did not hold beneficial
interests in the trusts, they were not adverse parties with
respect to each other. See, e.g., Schulz v. Commissioner, supra
at 495-496.
In 1998, the OMK Company Trust paid petitioners’ costs of
housing, medical care, travel, and family gatherings. The OMK
Company Trust also paid the education expenses of petitioners’
grandchildren, who were not beneficiaries of the OMK trusts.
Several factors indicate that petitioners retained total control
over the OMK trusts and that the trusts are grantor trusts.
First, none of petitioners’ powers as trustees required the
consent of an adverse party. Second, petitioners retained
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