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Although the McKenzie Trust was ostensibly engaged in the
business of restoring Model T Fords, it was petitioner who worked
full time to order automotive parts from suppliers, to purchase
rusted Model T Ford chassis, and to restore them into finished,
operable, and safe Model T Ford speedsters for resale at
auctions. Mr. Boatright signed checks from the trust’s bank
account in advance so that petitioner could fill them out when he
purchased automobile parts. The McKenzie Trust had no employees
other than petitioner, and all of the income earned by the
McKenzie Trust was attributable to petitioner’s labor. No agent
of Glenmere Investments was ever involved with the automobile
restoration business allegedly conducted by the McKenzie Trust.
Petitioner filed Forms 1041 for the taxable years 1995
through 1998 in the name of the McKenzie Trust, which were signed
by Mr. Boatright. The 1995 and 1996 returns claimed income
distribution deductions for amounts allegedly distributed to
Glenmere Investments, and the trust did not pay any income taxes
in 1995 or 1996. On the McKenzie Trust’s 1996 return,
petitioner’s management fees were deducted on Schedule C, Profit
or Loss From Business, as legal and professional services in
computing the trust’s income that was distributed. For the
taxable year 1997, the management fees paid to petitioner
exceeded the McKenzie Trust’s income, and, as a result, the
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