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acted merely as intermediaries which passed the economic
interests from the trusts ultimately to Mr. and Mrs. Norton and
their family.
D. Did the Taxpayer Feel Bound by Any Restrictions Imposed
by the Trust Itself or the Law of Trusts?
We find that, in practice, Mr. Norton was not bound by any
restrictions imposed by the trust instruments or the law of
trusts as to the use of transferred property. Although Mr.
Norton claimed that he needed Mr. Owens’ permission on large
projects, Mr. Owens testified that he did not forbid Mr. Norton
from doing any activity, but merely gave advice. Mr. Norton,
therefore, was able to use the property as he desired. Mr.
Norton’s unrestricted use of the property of the trusts
demonstrates that Mr. Norton was not, in fact, restricted in any
meaningful manner.
Additionally, petitioners presented no credible evidence
that any purpose other than tax avoidance was served by the
trusts to which Mr. Norton transferred his assets. Although Mr.
and Mrs. Norton argue that the main purpose of the trusts was to
protect their assets, we find it implausible that they would
relinquish control over a substantial amount of their income to a
foreign trust and trustee with whom they and Mr. Owens had no
contact if their true purpose was to protect these assets.
We conclude that the South Denali Lands Trust and the Denali
Company Trust lacked economic substance for Federal tax purposes.
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