Investment Research Associates - Page 295




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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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