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trustees with an average of 2 hours apiece per week devoted to
their work for HGRCT, and Mr. Richardson again signed the return
as trustee.
Examination
On July 13, 1999, the IRS mailed to each petitioner, with
respect to the 1996 and 1997 taxable years, a letter advising as
follows:
The Internal Revenue Service has information
indicating that you may be involved in a trust
arrangement used for tax avoidance purposes. This
letter is to inform you of the Internal Revenue
Service’s position regarding abusive trust
arrangements. It is the government’s position that
trusts will be disregarded for tax purposes and the
income will be taxed to the person who controls the
trust, if the trust lacks economic substance or has
been structured for tax avoidance purposes.
In addition to disregarding the trust entity, the
government may pursue civil and/or criminal penalties
against taxpayers and promoters who attempt to use
trusts to avoid income tax liability.
If you are a participant in a trust scheme that
has any of the abusive elements described in Notice 97-
24 attached, you have the option of correcting your
income tax filings to reflect the proper income and
expenses on your personal, corporate and partnership
returns, as applicable. Any trust returns previously
filed should also be corrected to eliminate income and
expenses reported.
The letters went on to request that petitioners provide
documentation with respect to the trust (presumably HGAMC) in the
event that they determined that their position was appropriate
under Notice 97-24, 1997-1 C.B. 409.
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