-2-
amounts as charitable contributions. We hold they may not.
We also decide whether petitioners are liable for the
accuracy-related penalty determined by respondent under section
6662(a). We hold they are. Unless otherwise noted, section
references are to the applicable versions of the Internal Revenue
Code. Rule references are to the Tax Court Rules of Practice and
Procedure.
FINDINGS OF FACT
Some facts were stipulated. The stipulated facts and the
exhibits submitted therewith are incorporated herein by this
reference. We find the stipulated facts accordingly.
Petitioners, husband and wife, resided in San Jose, California,
when their petition was filed. They filed a joint 1999 Form
1040, U.S. Individual Income Tax Return. That return reported
that petitioners’ 1999 total income was $19,504 and that their
total tax for that year was $1,024. That return reported that
their total income was attributable to (1) $19,365 of
compensation received by petitioner Jerry L. Hill (Hill) from
Re-Cap Trust and (2) $139 of tax-exempt interest.
Hill is a college-educated individual who has worked in
California for more than 2 decades as a real estate broker. In
or about 1995, he attended some seminars promoting the use of
trusts to shelter his liability for Federal income taxes. He
shortly thereafter formed Re-Cap Trust and transferred most if
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