- 19 -
transferred property differed materially before and after the
trust’s creation; (2) whether the trust had an independent
trustee; (3) whether an economic interest passed to other trust
beneficiaries; and (4) whether the taxpayer respected the
restrictions placed on the trust’s operation as set forth in the
trust documents. See, e.g., Muhich v. Commissioner, supra. As
discussed below, each of these factors supports a conclusion that
Mercury Solar PTO had no economic substance.
A. Sparkman's Relationship to the Mercury Solar Business
For about 10 years, Sparkman operated his Mercury Solar
business as a sole proprietorship. In 1993, he purported to
transfer the business to HEH; about a year later, HEH purported to
transfer it to Mercury Solar PTO. Insofar as the record reveals,
the business remained the same, apparently doing business under
the same name (Mercury Solar) as it always had, relying on
Sparkman’s technical expertise.19
As far as the record reveals, Sparkman’s relationship to the
Mercury Solar business did not differ materially before and after
these purported transfers to HEH and Mercury Solar PTO. As sole
19 In fact, Mercury Solar PTO does not even have its own
solar contractor’s license but instead uses Sparkman’s license.
As Sparkman testified in the trial of Richter v. Commissioner,
T.C. Memo. 2002-90:
I’m the one with the technical expertise [at Mercury
Solar PTO] and the license. In fact, Mercury Solar
uses my [solar contractor’s] license.
Page: Previous 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 NextLast modified: May 25, 2011