- 5 -
operated its jewelry business through 1993 when the partnership
terminated.5
In or around 1990, a customer of the jewelry business filed
a lawsuit against the partnership. The lawsuit was dismissed
approximately 18 months later after a 5-day trial.
After the partnership terminated, petitioner operated the
jewelry business as a sole proprietorship. Petitioner reported
the income and expenses generated by his jewelry business from
January 1, 1994, to the date he transferred his jewelry business
into trust,6 on Schedule C, Profit or Loss from Business (Sole
Proprietorship), of his Form 1040 for 1994.
II. The Establishment and Operation of the Trusts
A. The Establishment of the Trusts
In 1994, the Castros decided to place all of their personal
and business assets in a tiered trust arrangement. The trusts
were established using several steps:
(1) On or about April 8, 1994, petitioner Margarita C.
Castro (Mrs. Castro) executed a bill of sale and a quitclaim deed
by which she conveyed to petitioner all of her interests in all
5The parties stipulated erroneously that the jewelry
business was operated as a sole proprietorship during 1993. We
disregard this stipulation and find facts consistent with the
evidence.
6By use of the terms “trust”, “trustee”, “beneficiary”, and
other related terms, we intend no implication as to the validity
of the trusts involved in these cases.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011