Frank W. George - Page 18




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          convinced that Arivada or Chisum had legal title to petitioner's             
          business.                                                                    
               Petitioner contends that East Point and S A Finance are                 
          beneficiaries of Arivada and that an economic interest passed to             
          them from Arivada.  The record does not support his contention.              
          Petitioner did not offer any credible evidence showing that East             
          Point had a beneficial or economic interest in Arivada in 1993 or            
          1994, that East Point's alleged beneficial interest in Arivada               
          changed from 100 percent in 1993 to 80 percent in 1994, that S A             
          Finance had a beneficial interest in Arivada in 1994, that East              
          Point and S A Finance had employer identification numbers, or                
          that Arivada distributed to East Point or S A Finance any money              
          or property as a result of this beneficial interest.                         
               Jones-George believed that Chisum could control those assets            
          if she and petitioner transferred them to Arivada.  However, the             
          fact that she believed the trust would have substance does not               
          mean that it did.                                                            
               3.   Whether Arizona Law Determines Whether Arivada Is a                
                    Sham for Federal Tax Purposes                                      
               Petitioner contends that, under sections 643, 651, and 652              
          of the Internal Revenue Code, Arizona law controls whether                   
          Arivada is a sham for Federal tax purposes.  Petitioner contends             
          that, under Arizona law, the person claiming that the trust or               
          other entity is not valid bears the burden of proof.  We disagree            
          that Arizona law controls here.  We need not recognize an entity             





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