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accept it. See Tokarski v. Commissioner, supra at 77; Peterman
v. Commissioner, supra.
After considering the four factors articulated in Markosian
v. Commissioner, 73 T.C. at 1243-1244, we have no doubt that the
trusts in question lacked economic substance and must be
disregarded for Federal income tax purposes. See also George v.
Commissioner, T.C. Memo. 1999-381. We hold for respondent on
this issue.12 Because the parties agree that, if we disregard
the trusts for Federal income tax purposes, the net income from
the jewelry business is taxable to petitioner and not to the
trusts, we hold accordingly.
III. Self-Employment Tax
Respondent contends that the net income from the jewelry
business qualifies as net earnings derived by petitioner from the
jewelry business that he carried on during the years at issue and
that, therefore, petitioner is liable for self-employment taxes
on that income. See sec. 1401. The Castros disagree, arguing
only that the jewelry business was carried on by the CCJT and not
by petitioner. The Castros asserted no argument with respect to
the net earnings of the jewelry business in the event we held
that the trusts should be disregarded for Federal income tax
purposes.
12In light of our holding, we need not address respondent’s
alternative arguments that the jewelry business’ income should be
allocated to the Castros under the doctrine of assignment of
income or the grantor trust rules.
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