- 16 -
Commissioner, supra; Norton v. Commissioner, supra. Accordingly,
on this record, we find that Harlan was not in practice bound by
any restrictions imposed by Floors Trust or the law of trusts.
E. Conclusion
Petitioners claim on brief that Floors Trust was created to
benefit the designated beneficiaries and to ensure that Jody
would be the only child who would benefit directly from the
flooring business. However, the available evidence of
distributions shows that Harlan, not Jody, was the beneficiary of
the trust’s distributions, undermining their claim regarding the
purpose of forming the trust. Cf. Gouveia v. Commissioner, T.C.
Memo. 2004-256 (claim that trust was created as protection from
business liabilities not supported by evidence).
After considering the four factors articulated in Markosian
v. Commissioner, supra at 1243-1244, all of which favor
respondent, we find, on the basis of a preponderance of the
evidence, that Floors Trust lacked economic substance and should
be disregarded for Federal income tax purposes. We therefore
hold for respondent on this issue.9 Accordingly, the net income
of Floors Trust is properly taxable to Harlan.
9 In light of our holding, we need not address respondent’s
alternative contentions that Floors Trust’s income is taxable to
Harlan under the grantor trust rules or the assignment of income
doctrine. Additionally, since we have held that Floors Trust is
a nullity for Federal income tax purposes, we do not sustain
respondent’s determination that Floors Trust is liable for an
accuracy-related penalty pursuant to sec. 6662.
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