T.C. Memo. 2006-69
UNITED STATES TAX COURT
HOMER L. RICHARDSON, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
GLORIA M. RICHARDSON, Petitioner v.
COMMISSIONER OR INTERNAL REVENUE, Respondent
Docket Nos. 16794-03, 16795-03. Filed April 11, 2006.
Ps established a tiered trust arrangement and
transferred to the entities their assets, including
their personal residence and lifetime services.
Held: The trusts implemented and used by Ps
during 1996 and 1997 should be disregarded for tax
purposes as sham entities lacking in economic
substance, with resultant inclusion by Ps of income
reported by the trusts, recomputation of business
deductions allowable to Ps, and liability for self-
employment taxes.
Held, further, Ps are not entitled to capital loss
amounts claimed for both years and must recognize a
capital gain in 1997.
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