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FINDINGS OF FACT
In the mid-1990s, petitioner formed Stephens City
Chiropractic (SCC), a limited liability company; Win Enterprise
(WIN), a limited company; Fair Hollow Trust (FHT), a domestic
trust; and Fair Exit Trust (FET), a foreign trust. Petitioner
transferred 90 percent of his interest in SCC to FHT and retained
10 percent. Petitioner also transferred a percentage of his
interest in WIN to FHT.2 Petitioner subsequently transferred his
interest in FHT to FET.
In 1996 and 1997, petitioner, who is legally blind,
performed services as a chiropractor for SCC. In addition,
petitioner received $8,160 and $8,400 in Social Security benefits
relating to 1996 and 1997, respectively. Petitioner timely filed
his 1996 and 1997 Federal income tax returns and, on those
returns, reported the income he received from SCC and WIN
relating to those years.
On April 14, 2000, respondent sent the SCC and WIN tax
matters partners separate notices of final partnership
administrative adjustment (FPAAs). In the FPAAs, respondent
determined that FHT was a sham trust and attributed its
respective shares of SCC and WIN income and expenses to
petitioner. On that day, respondent also sent petitioner a
2 The record does not disclose the percentage of WIN that
petitioner transferred to FHT or personally retained.
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Last modified: May 25, 2011