- 12 -
Commissioner, 79 T.C. 714, 719 (1982), affd. 731 F.2d 1417 (9th
Cir. 1984); Markosian v. Commissioner, 73 T.C. 1235, 1241 (1980).
This rule applies even if the trust is recognized pursuant to
State law as a business trust or other form of jural entity. See
Zmuda v. Commissioner, supra.8
Whether a trust lacks economic substance is a question of
fact. See Paulson v. Commissioner, 992 F.2d 789, 790 (8th Cir.
1993), affg. per curiam T.C. Memo. 1991-508. Relevant factors
include whether the taxpayer’s relationship as grantor to the
property differed materially before and after the trust’s
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.
8 This is not the first occasion we have had to examine
trust arrangements devised and promoted by the Noskes. On each
occasion, we determined that they were sham entities used by
taxpayers to avoid income tax. See, e.g., Scherping v.
Commissioner, T.C. Memo. 1998-288; Paulson v. Commissioner, T.C.
Memo. 1991-643, affd. without published opinion 994 F.2d 843 (8th
Cir. 1993); Paulson v. Commissioner, T.C. Memo. 1991-508, affd.
992 F.2d 789 (8th Cir. 1993); Scherping v. Commissioner, T.C.
Memo. 1991-384; Chase v. Commissioner, T.C. Memo. 1990-615; Chase
v. Commissioner, T.C. Memo. 1990-164, affd. 926 F.2d 737 (8th
Cir. 1991); Scherping v. Commissioner, T.C. Memo. 1989-678.
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