- 23 -
other beneficiaries. See Markosian v. Commissioner, supra at
1244. This factor weighs against petitioners.
D. Restrictions Imposed by the Trusts or by the Law of
Trusts
The fourth factor we consider is whether the Castros honored
restrictions imposed by the trusts or by the law of trusts. See
id. at 1244. The Castros contend that tax avoidance was not
their primary motivation and that they felt a fiduciary duty to
the trusts and the beneficiaries. We disagree.
The Castros’ unrestricted use of the assets transferred to
the CFT and the CCJT for nominal, if any, consideration indicates
that the Castros, as trustees, were not restricted in any
economically substantive way. See Buckmaster v. Commissioner,
supra; Hanson v. Commissioner, T.C. Memo. 1981-675. Moreover,
the authority granted to the Castros as trustees of the trusts
was so broad that very few restrictions, if any, were actually
imposed on the Castros by the trust structure. This factor
weighs against petitioners.
E. Conclusion
Petitioner testified at trial that the Castros intended to
limit their liability, protect their assets from creditors, avoid
probate, and ensure their financial privacy by creating the trust
structure and denied that tax factors had any impact on their
decision. This testimony was not credible, particularly when the
declarations of trust and the facts and circumstances surrounding
the establishment of the trusts are considered, and we do not
Page: Previous 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 NextLast modified: May 25, 2011