Steve M. and Khristine Norton, et al. - Page 17




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               The only restriction that the trust placed on Mr. Norton’s             
          decisions with regard to SNE was that he was required to obtain             
          authorization from Mr. Owens on large projects.  During trial,              
          Mr. Owens testified that he would not require or demand that SNE            
          operate in a certain fashion but would merely provide advice.               
          Mr. Owens did not forbid Mr. Norton from doing any activities               
          with SNE.  We find that the authorization on large projects for             
          SNE did not effect a material change in Mr. Norton’s relationship           
          to and control of the business or assets of SNE.                            
               B.   Did the Trust Have an Independent Trustee?                        
               On the basis of the record, we find that Mr. Owens and Mr.             
          Crockett were not independent trustees and that they did not                
          perform any significant duties or exercise any significant                  
          control or power over the trusts.  The failure of a nominal                 
          trustee to have any meaningful role in the operation of the trust           
          has been repeatedly cited by this Court as evidence that the                
          entity lacks economic substance.  See, e.g., Zmuda v.                       
          Commissioner, 79 T.C. at 720; Para Techs. Trust v. Commissioner,            
          T.C. Memo. 1994-366, affd. without published opinion sub nom.               
          Anderson v. Commissioner, 106 F.3d 406 (9th Cir. 1997).                     
               First, Mr. Norton exercised control over the trustees                  
          through his brother, David Norton, who was the protector of the             
          trusts.  David Norton would consult Mr. Norton with regard to               
          replacing the trustees.  For example, if Mr. Norton disagreed               






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