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Vercio v. Commissioner, 73 T.C. 1246, 1253 (1980); see
also Schulz v. Commissioner, 686 F.2d 490, 493 (7th
Cir. 1982), affg. T.C. Memo. 1980-568. The "true
earner" of income is the person or entity who
controlled the earning of such income, rather than the
person or entity who received the income. See Vercio
v. Commissioner, supra at 1253 (citing Wesenberg v.
Commissioner, 69 T.C. 1005, 1010 (1978)); see also
Commissioner v. Sunnen, 333 U.S. at 604 ("The crucial
question remains whether the assignor retains
sufficient power and control over the assigned property
or over receipt of the income to make it reasonable to
treat him as the recipient of the income for tax
purposes."). * * *
Pursuant to a second fundamental principle, we may ignore a
transfer in trust as a sham where the transfer has not, in fact,
altered any cognizable economic relationship between the putative
transferor and the trust property. See, e.g., Zmuda v.
Commissioner, 79 T.C. 714, 719-722 (1982), affd. 731 F.2d 1417
(9th Cir. 1984). Recently, in Muhich v. Commissioner, T.C. Memo.
1999-192, affd. 238 F.3d 860 (7th Cir. 2001), we listed the
following factors to be considered in determining whether a trust
lacks economic substance for tax purposes:
(1) Whether the taxpayer’s relationship as grantor to
the property differed materially before and after the
trust’s formation; (2) whether the trust had an
independent trustee; (3) whether an economic interest
passed to other beneficiaries of the trust; and
(4) whether the taxpayer felt bound by any restrictions
imposed by the trust itself or by the law of trusts.
* * *
3. Grantor Trust Provisions
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