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In concluding that Louisiana property law determines
ownership for purposes of Federal income taxation in the instant
case, we are aware of our prior decisions holding that in some
circumstances we would ignore State law as to property ownership.
For example, we have held that a trust, valid under State law,
may be treated as a nullity for Federal income tax purposes if it
lacks economic reality. See Markosian v. Commissioner, 73 T.C.
1235, 1241 (1980); Furman v. Commissioner, 45 T.C. 360, 364
(1966), affd. 381 F.2d 22 (5th Cir. 1967); see also Audano v.
United States, 428 F.2d 251, 257-259 (5th Cir. 1970). In those
cases, we looked at whether there were any economic changes to
the donors other than changes to their Federal income tax
liability. In Furman, we indicated that it was the “extreme
case” where we would disregard for Federal income tax purposes
the existence of a trust valid under State law. Furman v.
Commissioner, 45 T.C. at 366.
In the instant case, petitioners entered into the marriage
contract, among other reasons, to prevent Rucker from aggregating
petitioners’ incomes in an attempt to reduce or eliminate his
child support obligations. Comparisons of Sandra’s and Michael’s
Federal income tax returns plainly show that they are not under a
community property marriage regime. This is not one of those
“extreme cases” that calls for us to disregard a contract valid
under State law for Federal income tax purposes.
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