Jerry L. and Valerie J. Hill - Page 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           
                                  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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