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implausibility of the trust arrangement and petitioners’ failure
to provide any legitimate reason for creating the trusts.
At trial, petitioner asserted that he chose the trust form
to conduct his businesses so that he would earn the income
without incurring any liability. However, petitioner was unable
to articulate any liability issues that could potentially arise
in the course of his businesses, which undermines petitioner’s
claim that asset protection was a consideration in forming the
trusts. On the other hand, petitioner testified that he did not
expect that the McKenzie Trust’s automobile restoration business
would be profitable. We find petitioner’s testimony to be
completely self-serving, often contradictory, and lacking in
credibility.
Petitioners further contend that petitioner formed the Pago
Trust to obtain foreign financing while maintaining an interest
in the property. However, the record is devoid of any credible
evidence that the Brookes Group ever transferred any funds to the
Pago Trust. To the contrary, the Pago Trust borrowed funds from
a variety of domestic sources in order to purchase and develop
the Cross Street property. Petitioner was not aware of the
Brookes Group’s having ever fulfilled its commitment to provide
funds to the Pago Trust and could not explain why the Pago Trust
continued to wire funds overseas to the Brookes Group.
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