- 27 - This principle applies regardless of whether the transaction creates an entity with separate existence under State law. Zmuda v. Commissioner, 79 T.C. at 720. Petitioners argue that they did not create the OMK trust to avoid taxes. We find the testimony of Mr. Kooyers was sincere and credible. He testified that he and Mrs. Kooyers established the trusts to provide for the continued funding of the missionary activities of P.I. Ministries and for the education of their grandchildren. Although we are convinced that petitioners intended to support the missionary activities of P.I. Ministries,10 the record does not establish that any beneficial interest passed to P.I. Ministries. The named beneficiaries of the OMK trusts are petitioners’ children and the OMK Charitable Trust. Documents related to the OMK Charitable Trust are not in the record, however, and the beneficiaries of the OMK Charitable Trust are not identified in the record. Courts will disregard a transaction when the transaction has no economic effects other than the creation of tax benefits. 10The Department of Justice (DOJ) began a campaign to stop the spread of phony trust schemes that the Government contends are being used illegally to evade the payment of taxes. In a lawsuit the DOJ filed, the Government obtained a permanent injunction against Roderick Prescott, a former promoter of NTS, barring him from selling trust schemes that falsely claimed an individual’s personal expenses could be paid through a trust to obtain tax benefits not available to the individual. United States v. Prescott, Civil No. 02-CV-0692-L (S.D. Cal., June 2, 2003).Page: Previous 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 Next
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