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did not differ materially from their relationship to the property
after they created the trusts and transferred the property to the
trusts. The OMK trusts did not engage in any trade or business,
and petitioners, as trustees, had complete control over the
income-producing property of the trusts.
The second factor we consider is whether the trust had a
bona fide independent trustee. Markosian v. Commissioner, supra
at 1243-1244. Although NTS was named as an initial trustee of
the OMK Family Trust, Fritts of NTS simply signed the formation
documents. In contrast, petitioners exercised complete control
over the OMK trusts’ assets and made all decisions regarding the
trusts. We find that no independent trustee had any meaningful
role in operating the OMK trusts. In addition, the record does
not indicate that a genuine economic interest in the trusts
passed to anyone other than petitioners. As to the fourth factor
whether petitioners honored restrictions imposed by the trusts or
by the law of trusts, we note that petitioners were not bound by
any restrictions imposed by the trust instruments or the law of
trusts as to the use of transferred property. See Norton v.
Commissioner, T.C. Memo. 2002-137. Petitioners’ transferring the
titles of assets to the OMK trusts while retaining the use and
enjoyment of the assets are transactions that have no economic
effect other than to create income tax benefits. Consequently,
the OMK trusts will not be recognized for tax purposes.
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