Leon L. Zachman and Estate of Ione Zachman - Page 13

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              The evidence clearly establishes that Hillside Farm 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 Hillside Farm.                   
         Although petitioners purported to transfer all their income-                 
         producing personal property to Hillside Farm, in reality they                
         retained dominion and control over it, with their sons providing             
         most of the labor in return for weekly wages.                                
              The record does not establish that Parnell and Armageddon               
         were independent trustees or that they performed any significant             
         duties or exercised any significant control or power over the                
         farm.  Contrary to the terms of Article IV, Section 3, of the                
         Declaration of Trust, Parnell and Armageddon did not have                    
         “absolute and exclusive power and control over the management and            
         conduct of the business”.  Petitioners concede that Inman and                
         Foshaug were strangers to Hillside Farm and were nothing more                
         than figurehead presidents of the corporate trustees, merely                 
         signing documents, often blank or incomplete, at the instigation             
         of the Noskes.  The use of strangers as signers of organizational            
         documents and the absence of any meaningful role by nominal                  
         trustees in the operation of the trust are evidence that the                 
         purported trust lacks economic substance.  See Para Techs. Trust             
         v. Commissioner, T.C. Memo. 1994-366, affd. without published                

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