Frank and Virginia Muhich - Page 5

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          financial performance.  Petitioner had a wide variety of duties             
          including serving as Midwest's president and salesman.                      
               Kim and Denise Martin (Martins) are certified public                   
          accountants and have been petitioners' tax advisers since 1982.             
          The Martins prepared all of petitioners' tax returns from 1982 to           
          date, and the Martins maintained petitioners' books and records             
          for each of the subject years.                                              
          Introduction to the Multitrust Scheme                                       
               In early March 1994, petitioner met with a financial                   
          planner, James Myers (Myers).  Myers was a representative of                
          Heritage Assurance Group (Heritage), an entity that promoted                
          multitrust schemes as a means to avoid paying taxes.  Myers                 
          introduced petitioner to Heritage's scheme, which worked                    
          generally as follows.  An individual transfers his or her assets            
          and right to receive income to a newly created family trust in              
          exchange for a certificate of beneficial interest (CBI).  A CBI             
          gives the individual the right to receive any distributions that            
          the trustee, who is the same as the transferring individual,                
          decides to make.  The family trust pays and deducts all of the              
          trustee's personal expenses and distributes any excess corpus to            
          a charitable trust created under the scheme.  The individual                
          creates other trusts to circulate funds among and between.                  
               Myers presented petitioner with promotional materials                  
          containing flowcharts and explanations detailing the above                  

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