Frank and Virginia Muhich - Page 15

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          When the settlor is a trustee and the beneficiaries are the                 
          settlor and his family, the trusts must be closely scrutinized              
          for economic substance.  See Markosian v. Commissioner, supra at            
          1245; see also Helvering v. Clifford, 309 U.S. 331, 334 (1940).             
               We consider the following factors when deciding whether a              
          trust lacks economic substance for tax purposes:  (1) Whether the           
          taxpayer's relationship as grantor to the property differed                 
          materially before and after the trust's formation; (2) whether              
          the trust had an independent trustee; (3) whether an economic               
          interest passed to other beneficiaries of the trust; and (4)                
          whether the taxpayer felt bound by any restrictions imposed by              
          the trust itself or by the law of trusts.  See Markosian v.                 
          Commissioner, supra at 1243-1245; see also Buckmaster v.                    
          Commissioner, T.C. Memo. 1997-236.                                          
               As to the first Markosian factor, the Muhichs' relationship            
          to their property did not differ materially before and after the            
          formation of the trusts.  The Muhichs' personal residence was the           
          address for all the trusts, and their personal use of their                 
          property was never restricted.  As sole trustees and sole owners            
          of the CBI's, the Muhichs could manipulate, distribute, or                  
          otherwise use trust property at their whim.  In fact, the trust             
          instruments gave them sole discretion to deal in trust property             
          and make distributions.                                                     

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