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OPINION
At the outset we reject Kanter's contention that respondent
had raised "new matter" on which respondent bore the burden of
proof in asserting that the income from the various partnerships
was Kanter's income in 1986 rather than 1987. A notice of
deficiency was issued to Kanter for 1986, and a petition was
filed. That year is before the Court. Therefore, a reallocation
of the partnerships' income between 1986 and 1987 is permissible
for the reasons stated in our findings of fact.
The pivotal question here is whether the Bea Ritch Trusts
should be recognized in 1986 and 1987 as separate taxable
entities, apart from Kanter, or whether Kanter should be treated
as the true owner of the trusts and thus taxable on BRT's income
for those years.
Kanter contends that the Bea Ritch Trusts were valid grantor
trusts that correctly reported income, deductions, and losses in
1986 and 1987. He asserts that his mother, not himself, was both
the nominal and true grantor of BRT, and that Weisgal, as
trustee, made the decisions to invest or not to invest for the
trusts. To the contrary, respondent contends that Kanter was the
true owner of the Bea Ritch Trusts, and the trusts' income for
1986 and 1987 is taxable to him.
We agree with respondent. Although a trust may be valid
under State law, the trust will not necessarily be recognized for
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