- 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 the
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 Next
Last modified: May 25, 2011