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ascertain whether a purported trust lacks economic substance for
Federal income tax purposes. These factors include: (1) Whether
the taxpayer's relationship, as grantor, to the property differed
materially before and after the trust's formation; (2) whether
the trust had an independent trustee; (3) whether an economic
interest passed to other beneficiaries of the trust; and
(4) whether the taxpayer felt bound by any restrictions imposed
by the trust itself or the law of trusts. Zmuda v. Commissioner,
79 T.C. 714, 720-722 (1982), affd. 731 F.2d 1417 (9th Cir. 1984);
Markosian v. Commissioner, supra at 1243-1245; Hanson v.
Commissioner, T.C. Memo. 1981-675. Our analysis of each of these
factors supports our conclusion.
With respect to the first factor, we look to the economic
reality of a purported arrangement to determine who actually is
the settlor of a trust, whether or not named as settlor in the
related documents. Zmuda v. Commissioner, supra at 720.
Although the documents at hand list Cache as the settlor of Ideal
Management, the fact of the matter is that Cache acted merely as
a "straw man" to form Ideal Management. See United States v.
Scott, 37 F.3d at 1570. We find that petitioner paid a $2,500
fee to transfer his assets to Ideal Management, and that Ideal
Management's only assets during 1992 were petitioner's
transferred assets including, possibly, the residence. We find
that petitioner used all of these properties as his own both
before and after the transfer; i.e., he used his tools and
vehicles to generate large revenues, and he and Webb lived in the
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