CIM Trust - Page 8




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          465, 469 (1935).  However, transactions that have no significant            
          purpose other than to avoid tax and that do not reflect economic            
          reality will not be recognized for Federal income tax purposes.             
          Zmuda v. Commissioner, 79 T.C. 714, 719 (1982), affd. 731 F.2d              
          1417 (9th Cir. 1984); Markosian v. Comissioner, 73 T.C. 1235,               
          1245 (1980); see also Furman v. Commissioner, 45 T.C. 360, 364-             
          366 (1966), affd. 381 F.2d 22 (5th Cir. 1967).  Where the form of           
          a transaction has not altered any cognizable economic                       
          relationships, we look through the form of the transaction and              
          apply the tax law according to the transaction’s substance.                 
          Markosian v. Commissioner, supra at 1241.  This principle applies           
          regardless of whether the transaction creates an entity with                
          separate existence under State law.  Zmuda v. Commissioner, supra           
          at 720; see also Furman v. Commissioner, supra at 364.                      
               In deciding whether a purported trust lacks economic                   
          substance, we consider the following factors:  (1) Whether the              
          taxpayer’s relationship, as grantor, to property purportedly                
          transferred into trust differed materially before and after the             
          trust’s formation; (2) whether the trust had a bona fide                    
          independent trustee; (3) whether an economic interest in the                
          trust passed to trust beneficiaries other than the grantor; and             
          (4) whether the taxpayer honored restrictions imposed by the                
          trust or by the law of trusts.  See Markosian v. Commissioner,              
          supra at 1243-1245.                                                         






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