- 23 - found income from property held in trusts similar to the OMK trusts taxable to the grantors of those trusts under the “grantor trust” provisions set out in sections 671 through 677. See, e.g., Zmuda v. Commissioner, supra at 1421; Holman v. United States, supra at 464-65; Hanson v. Commissioner, supra at 1234; Vnuk v. Commissioner, supra at 1321. Under specified circumstances, the grantor trust provisions treat the grantor of the trust as the substantial owner of all or part of the trust, and all of the income and deductions pertaining to that part of the trust must be taken into account by the grantor. Sec. 671. The grantor trust is not taxed on the income that is taxable to the grantor. Id. For purposes of the grantor trust provisions, a grantor includes any person to the extent that person either creates a trust or gratuitously transfers property, directly or indirectly, to a trust. Sec. 1.671-2(e)(1), Income Tax Regs. If one person creates or funds a trust on behalf of another person, both persons are treated as grantors of the trust. Id. Courts have examined trust arrangements, similar to those at issue here, where the wife generally conveys all her property to the husband who then conveys to the trust all his property, including the property transferred from his wife. Although the wife was not aPage: Previous 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 Next
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