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documents.9 Petitioner's inability to discuss basic trust
concepts is inconsistent with his contention that the trust
scheme was a legitimate business arrangement.10
In sum, petitioners established the trusts with an aim to
avoid, improperly, Federal income tax. None of the trusts ever
reported taxable income, and none of them conducted a legitimate
business activity. Petitioners' purpose for the trust scheme was
to take untaxed money out of Midwest and circulate it around the
trusts to pay the Muhichs' personal expenses. The Muhichs
admitted as much at trial. Although the Muhichs attempted to
identify other nontax reasons for the trusts, we find these
9 The following colloquy between petitioner and respondent's
counsel on cross-examination exemplifies petitioner's elusiveness
and lack of knowledge as to the operation of the trust scheme:
Q Edward Bartoli helped set up the initial
trust for you. Is that right?
A Right.
Q And that would include the declarations
for each of the trusts?
A I'm not that familiar with terms. It's
all written down. You have the trust
documents, so whatever's in the documents is
what we did.
10 We were similarly unimpressed with Ms. Muhich. She
admitted she was only "kind of" familiar with two of the trusts
and stated that she knew more about the entire scheme after
sitting through the trial than she did before.
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