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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 a
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