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entity will control over the form. Zmuda v. Commissioner, 731
F.2d 1417, 1420 (9th Cir. 1984), affg. 79 T.C. 714, 719 (1982);
Markosian v. Commissioner, 73 T.C. 1235, 1241 (1980). These
principles apply even though an entity may have been properly
formed and have a separate existence under local law. Zmuda v.
Commissioner, 79 T.C. at 720; Vercio v. Commissioner, 73 T.C.
1246, 1253 (1980).
Whether a trust lacks economic substance for tax purposes is
a factual question to be decided on the basis of the facts before
the Court. Paulson v. Commissioner, T.C. Memo. 1991-508, affd.
per curiam 992 F.2d 789 (8th Cir. 1993) (citing United States v.
Cumberland Pub. Serv. Co., 338 U.S. 451 (1950)).
We consider the following factors to determine whether a
purported trust lacks economic substance for Federal income 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 the law of trusts.
Markosian v. Commissioner, supra at 1243; Hanson v. Commissioner,
T.C. Memo. 1981-675, affd. per curiam 696 F.2d 1232 (9th Cir.
1983). After considering each factor, we hold that the South
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