- 9 - Respondent argues that the Morrows were effectively the grantors of the trust because they arranged and paid for the establishment of the trust and effectively transferred their pest control business to the trust. Respondent relies on Zmuda v. Commissioner, supra at 720, and does not rely on the grantor trust provisions under sections 671 to 678. Petitioners assert that Kimmey was the settlor of the trust because she is named as the donor in the trust document and she funded the trust with $1,001. The Morrows claim that they did not transfer assets, not even personal assets, to the trust, because the Morrows leased the business equipment to the trust. However, Peter Morrow testified that he had not signed or even seen the purported lease, and no payments were made by the trust to him for use of the equipment. “In determining the settlors of a trust, we look beyond the named grantors to the economic realities to determine the true grantor.” Id. Kimmey was a straw man who acted only in form as the grantor of the trust. Kimmey’s involvement was a mere formality; she signed the trust document and funded the trust with a nominal amount. Considering the economic realities, the true grantors of the trust are the Morrows. The Morrows, upon the advice of their tax preparer, consulted with an attorney who drafted the trust documents; the Morrows paid $2,495 for the trust package and asked their daughter to get involved in thePage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 Next
Last modified: May 25, 2011