Robert A. and Colleen L. Lund - Page 11




                                       - 11 -                                         
               We are incredulous that petitioner would have transferred              
          his 100-percent ownership interest in LPS, which petitioner                 
          believed to be worth $1 to $2 million, to a foreign corporation             
          in exchange for no stated consideration and with nothing more               
          than an unsecured employment relationship.  Petitioners have                
          failed to establish that their relationship to LPS differed                 
          materially before and after the formation of Zero Gee.                      
               With regard to the second factor, in form, Zero Gee                    
          purportedly was managed by an independent trustee.  The failure             
          of Bigelow Charter, Sun Federal, Loren and Bonnie Troescher, or             
          Owen Charles to have any meaningful role in the management of the           
          trust is evidence that the Zero Gee trust lacked economic                   
          substance.  See Zmuda v. Commissioner, 79 T.C at 720-721.  The              
          evidence in these cases indicates that the trustees of Zero Gee             
          performed no meaningful work for Zero Gee.                                  
               The sparse evidence regarding the third factor indicates               
          that the beneficiaries of Zero Gee received nothing more than a             
          token payment for their participation or complicity in the trust            
          scheme.  Clearly, neither International Palm nor Universal Sun              
          received an economic interest in Zero Gee.  In spite of Zero                
          Gee’s cumulative 3-year net income in excess of $1 million,                 
          International Palm and Universal Sun received nominal funds from            
          Zero Gee (i.e., the majority of Zero Gee’s income was not                   
          distributed), and yet Zero Gee reported no tax on any of its                






Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  Next

Last modified: May 25, 2011