CIM Trust - Page 9




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               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 the               






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