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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
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