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III. Is Floors Trust Disregarded for Federal Income Tax
Purposes?
Respondent contends that Floors Trust lacks economic
substance and should therefore be disregarded for Federal income
tax purposes. Petitioners assert that Floors Trust should be
recognized as a valid entity for Federal income tax purposes.
For the reasons discussed below, we agree with respondent.
Accordingly, the income received by Floors Trust is taxable to
Harlan.
It is well established that taxpayers have a right to
minimize their taxes by structuring their transactions in any
legally permissible manner. Gregory v. Helvering, 293 U.S. 465,
469 (1935). However, transactions that lack any significant
economic purpose other than to avoid taxes will not be recognized
for Federal income tax purposes, see Zmuda v. Commissioner, 79
T.C. 714, 720 (1982), affd. 731 F.2d 1417 (9th Cir. 1984), and we
will look beyond the form of such transactions and apply the tax
law in accordance with the substance of these transactions, see
Markosian v. Commissioner, 73 T.C. 1235 (1980); Furman v.
Commissioner, 45 T.C. 360 (1966), affd. per curiam 381 F.2d 22
(5th Cir. 1967).
We have considered the following factors in deciding whether
a purported trust lacks economic substance and should, therefore,
be disregarded as an invalid entity for Federal income tax
purposes: (1) Whether the relationship of the grantor to the
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