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OPINION
I. Is Income Reported by the South Denali Lands Trust and
Denali Company Trust Includable in the Gross Income of Mr.
and Mrs. Norton?
Petitioners have the burden of proving that they are not
liable for the deficiencies determined by respondent. Rule
142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933).6
Petitioners argue that the trust documents provide a
sufficient description of the trust and the trustees’ duties, and
they are, therefore, legally enforceable because the form cannot
be ignored. Petitioners contend that Mr. and Mrs. Norton had an
established business purpose for altering the form of SNE from a
sole proprietorship to a trust in order to protect their assets
from a decline in the economy. Additionally, petitioners argue
that the trusts pass the economic substance test because, in
petitioners’ view, the trusts have an independent trustee; Mr.
Norton’s relationship to the property differed materially after
trust formation; an economic interest passed to the
beneficiaries; and Mr. and Mrs. Norton honored the restrictions
imposed by the trusts.
6 Cf. sec. 7491 is effective for court proceedings arising
in connection with examinations commencing after July 22, 1998.
Respondent contends that sec. 7491 is inapplicable because the
examinations commenced before July 22, 1998. Petitioners do not
contend that their examinations began after this date or that
sec. 7491 is applicable to their case.
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