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requirements or made any demands with respect to the manner in
which the flooring business was operated.
On the basis of the record, we find that Harlan’s
relationship to the property transferred to Floors Trust did not
differ in any material respect after the transfer. See Gouveia
v. Commissioner, T.C. Memo. 2004-256; Norton v. Commissioner,
T.C. Memo. 2002-137.
B. Independent Trustee
At its creation, the trustees of Floors Trust were Jody and
Roland. On May 1, 1996, Roland purported to resign and appoint
Becky as his replacement. Petitioners admit that the
requirements of the trust instrument were not observed in this
purported resignation and replacement.7 Roland’s resignation was
not witnessed, and there is no contemporaneous written evidence
that Jody approved the appointment of Becky as successor trustee,
as required in the trust instrument. Thus, petitioners were at
best somewhat lax with respect to the trust’s formal requirements
concerning trustees, and the competent evidence in this case
fails to establish unequivocally that Becky was a trustee. If
Roland’s purported resignation and replacement by Becky in 1996
were ineffective, then the only duly appointed trustees in 1998
7 Petitioners attached to their brief a “memo” in which Jody
admits that Roland’s 1996 resignation was not witnessed or
recorded in the trust minutes as required by the trust
instrument. Further, Jody admits that he failed to sign the
purported appointment of Becky in 1996.
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