- 26 - enjoyment of the trust corpus and income. Third, petitioners used the OMK trusts for their own benefit. We hold that the income of the OMK trusts is taxable to petitioners under the grantor trust provisions of sections 671-677. D. Trusts Lack Substance Finally, courts have frequently found that trusts substantially identical to the OMK trusts are lacking in any real substance and thus are without any effect for Federal tax purposes. See, e.g., Zmuda v. Commissioner, supra at 1421; Muhich v. Commissioner, T.C. Memo. 1999-192, affd. 238 F.3d 860 (7th Cir. 2001); Dahlstrom v. Commissioner, T.C. Memo. 1991-264, affd. without published opinion 999 F.2d 1579 (5th Cir. 1993); Clawson v. Commissioner, T.C. Memo. 1982-321. Taxpayers have a legal right to structure their transactions to minimize their tax obligations by whatever means allowable under the law. Gregory v. Helvering, 293 U.S. 465, 469 (1935). Transactions that have no significant purpose other than to avoid tax and do not reflect economic reality, however, will not be recognized for Federal income tax purposes. Zmuda v. Commissioner, 79 T.C. 714, 719 (1982), affd. 731 F.2d 1417 (9th Cir. 1984). If a transaction has not altered any cognizable economic relationships, we must look beyond the form of the transaction and apply the tax law according to the transaction’s substance. Markosian v. Commissioner, 73 T.C. 1235, 1241 (1980).Page: Previous 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 Next
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