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distribution deductions claimed on Zero Gee’s Federal income tax
returns.
Also, the evidence does not indicate that International Palm
and Universal Sun, the stated beneficiaries of Zero Gee, paid any
taxes (United States, British West Indies, or otherwise) on any
of the funds that Zero Gee treated as income distribution
deductions on its Federal trust income tax returns.
On audit, petitioner did not provide to respondent’s
representatives records relating to LPS and Zero Gee. In the
notice of deficiency issued to petitioners Robert and Colleen
Lund, respondent determined that the Zero Gee trust lacked
economic substance, and respondent charged petitioners for each
year in issue with the entire reported gross income of Zero Gee.
Alternatively, in the notice of deficiency issued to
petitioners Robert and Colleen Lund, respondent determined that
the grantor trust provisions of sections 671 through 677 applied
to Zero Gee and that the income of Zero Gee should be taxed to
petitioners individually.
Further, and protectively in a separate notice of deficiency
issued to Zero Gee for 1994, 1995, and 1996, respondent
determined under sections 671 through 679 for 1994, 1995, and
1996 that Zero Gee should be taxed on the reported income of Zero
Gee. No explanation is given in the notice of deficiency as to
the basis for this deficiency determination and, on brief,
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