Frank and Virginia Muhich - Page 21

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          controls the corporation's affairs.  See Paula Constr. Co. v.               
          Commissioner, supra at 1058.                                                
               While we held the trusts were shams and should be ignored              
          for tax purposes, we find the consulting contract helpful for the           
          limited purpose of determining the intent of the parties.  The              
          contract provides that "[Midwest] desires to contract the skills            
          and services of one Frank W. Muhich in the performance of                   
          services on behalf of [Midwest]," and we find that petitioner               
          performed these services for Midwest during the subject years.              
          Before the subject years, petitioner worked as a principal                  
          officer of Midwest, establishing its name recognition, overseeing           
          its business, and playing a key role in its success.  His work-             
          related duties did not change after the trusts were formed; he              
          continued to own and operate Midwest exactly as before, and                 
          Midwest continued to pay compensation for his services.  We                 
          conclude Midwest paid the "consulting fees" intending to                    
          compensate petitioner for his services.  In disregarding the                
          Asset Trust's existence for tax purposes, we view these payments            
          received directly by petitioner, the true earner of the income.             
               As to reasonableness, each year petitioner based his salary            
          upon the financial performance of Midwest.  We view this as a               
          reasonable way for an owner of a closely held business to                   
          compensate himself or herself.  The contract in this case                   
          specifically provides for compensation of $3,000 per month, plus            

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