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bookkeeper for the Ruidoso Valley Chamber of Commerce. Payment for
Mr. Muhn's services during 1991 was not made directly to him but
rather at Mr. Muhn's direction by Ruidoso Valley Chamber of
Commerce checks made payable to PFA Enterprises. These checks were
deposited into petitioner's account No. 20014362 at the First
Federal Savings Bank of New Mexico branch in Roswell, New Mexico.
PFA Enterprises
On March 1, 1989, PFA Enterprises (PFA or the trust), an
unincorporated Massachusetts business trust,1 was created by
Herbert Bates. Mr. Bates was paid $3,000 for his services.
Mr. Bates appointed Peer Financial Group as PFA's first
trustee to administer the trust. (David Smith was the agent for
Peer Financial Group; he has had no connection with PFA Enterprises
since its inception and has executed no documents on its behalf.)
Mr. Bates also appointed an interim beneficiary, First Surety Bank,
Ltd. (First Surety Bank) of the Marshall Islands, to hold PFA's
certificates for the trust's beneficiaries (namely, Mr. Muhn,
petitioner, their son John Scott Muhn (Scott Muhn), and Karen Kopp,
Scott Muhn's then fianc�e). Mr. Bates has had no connection with
1 A Massachusetts business trust is one in which property
is conveyed to trustees and held and managed for the benefit of
certificate holders. 12A C.J.S., Business Trusts, sec. 2 (1980).
Under Federal tax law, these entities may be treated as
corporations rather than trusts. Sec. 301.7701-4(b), Proced. &
Admin. Regs.
The parties have stipulated that PFA Enterprises should
be disregarded for tax purposes because it lacked economic
substance.
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