- 24 -
grantor technically, the courts refused to accept this
distinction. Rather, the courts have treated the wife as a
grantor because the adversity between parties is artificial and
will not shield the trust from the operation of the grantor trust
provisions. United States v. Buttorff, 563 F. Supp. 450, 454
(N.D. Tex. 1983), affd. 761 F.2d 1056 (5th Cir. 1985). The
wife’s “conveyance can be ignored, either on the familiar tax
principle that substance predominates over form, or because the
parties themselves treated it as neither a sale nor a gift.”
Schulz v. Commissioner, 686 F.2d at 496 (fn. ref. omitted).
These trusts violate the grantor trust statutes in substance, if
not in form. Id. at 495; accord Zmuda v. Commissioner, 731 F.2d
at 1421; Holman v. United States, supra at 464-65. Thus, Mrs.
Kooyers, as well as Mr. Kooyers, is a grantor of the OMK Family
Trust. Because petitioners are grantors of the OMK Family Trust,
they are also grantors of the OMK Company Trust and any other
trust for which the OMK trusts are grantors. See sec. 1.671-
2(e)(5), Income Tax Regs.
The grantor of the trust will be taxed on the income of the
trust under the grantor trust provisions if any of certain
conditions apply. First, he possesses a disqualifying
reversionary interest. Sec. 673. Second, the trust can be
revoked by the grantor or a nonadverse party. Sec. 676. Third,
trust income can be distributed to the grantor or the grantor’s
spouse or be used to pay for insurance on their lives without the
consent of an adverse party. Sec. 677. Fourth, specified powers
Page: Previous 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 NextLast modified: May 25, 2011