- 40 -
was in violation of the grantor trust provisions. See Zmuda v.
Commissioner, 731 F.2d 1417 (9th Cir. 1984); Holman v. United
States, 728 F.2d 462 (10th Cir. 1984); O’Donnell v. Commissioner,
726 F.2d 679 (11th Cir. 1984); Hanson v. Commissioner, 696 F.2d
1232 (9th Cir. 1983); Schulz v. Commissioner, 686 F.2d 490 (7th
Cir. 1982); Vnuk v. Commissioner, 621 F.2d 1318 (8th Cir. 1980);
Wesenberg v. Commissioner, 69 T.C. 1005 (1978).
A taxpayer’s adoption of a flagrant tax avoidance scheme
that has repeatedly been rejected by the courts is patently
negligent. Wesenberg v. Commissioner, supra at 1015; see also
Hanson v. Commissioner, T.C. Memo. 1981-675. Respondent has
produced ample evidence to demonstrate that the OMK trusts lacked
economic substance and served no real purpose other than tax
avoidance. Additionally, petitioners created the OMK trust after
this Court and other courts had considered several cases
involving similar abusive trusts and determined that the trusts
would not be respected for Federal income tax purposes. See,
e.g., Zmuda v. Commissioner, 79 T.C. 714 (1982); Markosian v.
Commissioner, 73 T.C. 1235 (1980); Schneider v. Commissioner,
T.C. Memo. 1987-560; Hanson v. Commissioner, supra.
Consequently, we conclude that respondent provided sufficient
evidence that petitioners’ understatement of tax was due to
negligence or disregard of rules and regulations and has met the
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