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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).
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