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in taxable income for 1997. These returns reported Federal
income tax liabilities of $2,465 for 1996 and $4,497 for 1997.
Each of the trusts filed Forms 1041, U.S. Income Tax Return for
Estates and Trusts, for tax years 1996 and 1997 reporting
negative taxable income.2
Petitioner did not keep a general ledger accounting system.
Instead, petitioner’s counsel admitted at trial that petitioner’s
records consisted of “just gross receipts, a massive amount of
receipts, he does not keep journals and stuff like that”.
On June 13, 1996, respondent sent a form letter to
petitioner’s current spouse, Jeanee Girazian, who at the time was
living with and working for petitioner and was a named trustee of
his trusts. Respondent’s letter stated that he had information
that Ms. Girazian might be involved in trust arrangements used
for tax avoidance purposes. The letter cited substantial
authority holding abusive trusts invalid and recommended that Ms.
Girazian obtain independent advice regarding the validity of the
trusts.
2Respondent issued notices of deficiency to the trusts
disallowing all trust deductions. The trusts failed to file
petitions to the Tax Court within the 90-day period provided by
sec. 6213(a). Respondent thereupon assessed deficiencies against
the trusts. Respondent has agreed to hold in abeyance efforts to
collect the assessed deficiencies from the trusts while the case
at hand is pending. In view of the agreement of the parties in
the case at hand that the trusts should be disregarded for
Federal income tax purposes since their inception, it is
understood that the assessments against the trusts will be
abated.
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