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Herbst Management Trust filed Form 1041, U.S. Income Tax
Return for Estates and Trusts (trust return), for each of the
taxable years 1996 and 1997. In separate Schedules K-1, Benefi-
ciary’s Share of Income, Deductions, Credits, etc., that Herbst
Management Trust included with each of its 1996 and 1997 trust
returns, Herbst Management Trust showed Mr. Herbst, Ms. Herbst,
and Herbst Charitable Trust as beneficiaries and Mr. Herbst and
Ms. Herbst as fiduciaries of Herbst Management Trust.
In each of its 1996 and 1997 trust returns, Herbst Manage-
ment Trust deducted depreciation with respect to certain personal
assets of Ms. Herbst and/or Mr. Herbst, including their personal
residence that they had transferred to Herbst Management Trust at
a time that is not disclosed by the record. Herbst Management
Trust also deducted other amounts in its 1996 and 1997 trust
returns with respect to personal expenses of Ms. Herbst and/or
Mr. Herbst.
During respondent’s examination of Herbst Management Trust’s
1996 and 1997 trust returns and thereafter, respondent was
provided with a trust document relating to Herbst Management
Trust. That document showed an individual named Edward Bartolli
as the original trustee of Herbst Management Trust. Edward
Bartolli resigned shortly after the Herbst Management Trust was
purportedly formed. During respondent’s examination of Herbst
Management Trust’s 1996 and 1997 trust returns and thereafter, no
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Last modified: May 25, 2011