Frank and Virginia Muhich - Page 18

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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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