Paul F. and Eleanore M. Nichols - Page 9




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          T.C. 1235, 1244-1245 (1980).  This is so even if the trust was              
          formed and had a separate existence under local law.  Zmuda v.              
          Commissioner, 79 T.C. 714, 720 (1982), affd. 731 F.2d 1417 (9th             
          Cir. 1984).                                                                 
               Petitioners never introduced a scintilla of evidence which             
          would disprove respondent’s determinations that the trusts are              
          shams.  In fact, petitioners failed to establish the very                   
          existence of the trusts.  Petitioners unsuccessfully attempted to           
          prove the existence of the trusts by Forms 1041, U.S. Income Tax            
          Return for Estates and Trusts, filed with respondent.  Those                
          forms do not persuade us that the trusts indicated in the forms             
          actually existed.  Petitioners have failed to introduce into                
          evidence any document establishing the terms of the trusts, nor             
          have they obtained the testimony of James A. Nichols, who is                
          described on the trust returns as trustee.  Petitioners were made           
          aware of the need for the trust documents during the examination            
          of their returns for the years in issue and during discovery.               
          They have not demonstrated that they lacked access to those                 
          documents, nor have they shown that James A. Nichols is                     
          unavailable to testify.  We infer from petitioners’ failure to              
          produce such evidence that either it does not exist or, if it               
          does exist, it would be negative to petitioners.  McKay v.                  
          Commissioner, 886 F.2d 1237, 1238 (9th Cir. 1989), affg. 89 T.C.            
          1063 (1987); Wichita Terminal Elevator Co. v. Commissioner, 6               






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