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Commissioner, T.C. Memo. 1987-453, affd. 865 F.2d 1221 (11th Cir.
1989).
The “ultimate direction and control” rested in petitioners,
not in the OMK Company Trust. Indeed, it would be unrealistic to
assume that anyone would transfer his or her lifetime services to
a family trust without having such control. Borchert v.
Commissioner, T.C. Memo. 1982-379. Moreover, such a purported
conveyance of lifetime services would be unenforceable and
essentially nugatory under applicable State law in at least the
vast majority of instances. United States v. Buttorff, supra at
1061.
Petitioners were the sole source of the OMK Company Trust’s
earned income and should be taxed on the income they generated
from their services. Cf. Vercio v. Commissioner, supra at 1254.
In such circumstances, the conveyance was merely an anticipatory
assignment of income and was insufficient to shift the incidence
of taxation from petitioners to the OMK trusts. We therefore
hold that the income earned by petitioners through their services
should be taxed to them.
C. Grantor Trusts
Petitioners transferred more than their earning abilities to
the OMK trusts. They also transferred all of their personal and
income producing property to the trusts. Different rules apply
to gifts of income-producing property to trusts. Courts have
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