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were Roland, a trustee who was under the impression that he had
resigned, and Jody.
Even if it were accepted that a valid replacement of Roland
by Becky was effected in 1996, so that Becky served as a trustee
in addition to Jody in 1998, Harlan’s own testimony makes it
clear that no trustee imposed any meaningful oversight or control
over Floors Trust in 1998. He conceded that no trustee made any
demands or imposed any requirements with respect to his operation
of the flooring business. Further, Harlan (as well as Jody) had
signatory authority over the trust’s checking account.
Neither Becky8 nor Roland testified at trial concerning any
meaningful oversight they may have performed as trustees of
Floors Trust, and we conclude, on the basis of their failure to
do so, that their testimony would have been unfavorable to
petitioners. Wichita Terminal Elevator Co. v. Commissioner, 6
T.C. 1158, 1165 (1946), affd. 162 F.2d 513 (10th Cir. 1947);
Gouveia v. Commissioner, supra.
In sum, given petitioners’ failure to observe formalities
with respect to the resignation and appointment of trustees, and
Harlan’s unfettered control of the trust’s assets and operations,
we conclude that Floors Trust did not have an independent trustee
who exercised meaningful control over its operations. See
Buckmaster v. Commissioner, T.C. Memo. 1997-236; see also Zmuda
8 See the section entitled Evidentiary Note, supra p. 7.
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