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formation, whether the trust had an independent trustee, whether
an economic interest passed to other beneficiaries of the trust,
and whether the taxpayer felt bound by any restrictions imposed
by the trust or by the law of trusts. See Markosian v.
Commissioner, supra at 1243-1245; Muhich v. Commissioner, T.C.
Memo. 1999-192. The burden of proof is on petitioners. See Rule
142.
The evidence clearly establishes that Oak Hill lacked
economic substance and was merely a paper entity created for the
primary purpose of reducing petitioners’ Federal income tax.
Petitioners’ relationship to their property did not differ
materially before and after the creation of Oak Hill. Although
petitioners purported to transfer all their income-producing
personal property to Oak Hill, in reality they retained dominion
and control over it. They continued to operate the farm and
parts businesses just as they always had, making all the
management decisions. Together with their sons Gerard and Ryan,
petitioners provided all the income-producing labor and made all
the management decisions. Petitioner wife testified that, except
for bookkeeping, “Everything is run the same” on their farm as it
was before the creation of Oak Hill. Petitioner wife testified
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