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reported income. Additionally, the ownership of International
Palm and Universal Sun was not disclosed. Based on the evidence,
we are convinced that no economic interest in LPS or in Zero Gee
passed to any named beneficiary of Zero Gee.
The evidence also establishes that petitioner, in his
continued management of LPS, was not bound or restricted by the
terms of the Zero Gee trust. Petitioner obtained bank loans and
credit for the business without approval of the trustees of Zero
Gee. Petitioner appears to have had essentially unrestricted use
of the property purportedly transferred to Zero Gee. The
trustees were not meaningfully involved in the business of LPS or
of Zero Gee. Petitioner was not restricted in any meaningful
manner in his use of the funds or in his management of LPS and
Zero Gee.
The only recognizable purpose for the formation of Zero Gee
was tax avoidance. For $30,000, petitioner purchased a sham
trust package supported by no economic substance. We conclude
that Zero Gee lacked economic substance and that the net income
of Zero Gee is taxable to petitioner.
Because we disregard Zero Gee for tax purposes and sustain
respondent’s deficiency determination against petitioners for the
years in issue, respondent’s protective deficiency determination
against Zero Gee is not sustained.
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