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For all issues in this case except the penalty under section
6673, respondent's determination is presumed correct, and
petitioners bear the burden of proving it wrong. See Rule
142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). Where an
entity is created that has no real economic effect and which
affects no cognizable economic relationship, the substance of a
transaction involving the entity will control over its form. See
Zmuda v. Commissioner, 79 T.C. 714, 720 (1982), affd. 731 F.2d
1417 (9th Cir. 1984); Markosian v. Commissioner, 73 T.C. 1235,
1241 (1980). Regarding economic substance, we recently stated:
"The doctrine of economic substance becomes applicable, and a
judicial remedy is warranted, where a taxpayer seeks to claim tax
benefits, unintended by Congress, by means of transactions that
serve no economic purpose other than tax savings." ACM
Partnership v. Commissioner, T.C. Memo. 1997-115, affd. in part,
revd. on other grounds in part, dismissed in part and remd. in
part 157 F.3d 231 (1998). We find such lack of economic purpose
in this case.
More specifically, we have held a trust is not recognized
for tax purposes if it has no economic substance apart from tax
considerations. See Markosian v. Commissioner, supra at 1244-
1245. These principles apply even though an entity may have been
properly formed and may have had a separate existence under
applicable local law. See Zmuda v. Commissioner, supra at 720.
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