- 33 -
by any means which the law permits. Gregory v.
Helvering, 293 U.S. 465, 469 (1935). However, this
right does not bestow upon the taxpayer the right to
structure a paper entity to avoid tax when that entity
does not stand on the solid foundation of economic
reality. When the form of the transaction has not, in
fact, altered any cognizable economic relationships, we
will look through that form and apply the tax law
according to the substance of the transaction.
Markosian v. Commissioner, 73 T.C. 1235 (1980), citing
Furman v. Commissioner, 45 T.C. 360 (1966), affd. per
curiam 381 F.2d 22 (5th Cir. 1967). This rule applies
regardless of whether the entity has a separate
existence recognized under State law (Furman v.
Commissioner, supra at 365), and whether, in form, it
is a trust, a common law business trust, or some other
form of jural entity. * * * [Zmuda v. Commissioner, 79
T.C. 714, 719-720 (1982), affd. 731 F.2d 1417 (9th Cir.
1984); fn. ref. omitted.]
In ascertaining whether a trust has no economic substance
apart from tax considerations, the Court has identified four
pertinent factors: (1) Whether the taxpayer’s relationship, as
grantor, to the property ostensibly transferred to the trust
differed materially before and after the trust’s formation; (2)
whether the trust had a bona fide independent trustee; (3)
whether an economic interest in the trust passed to other
beneficiaries; and (4) whether the taxpayer felt bound by any
restrictions imposed by the trust itself or the law of trusts.
Markosian v. Commissioner, 73 T.C. 1235, 1243-1244 (1980);
Gouveia v. Commissioner, T.C. Memo. 2004-256; Norton v.
Commissioner, T.C. Memo. 2002-137; Castro v. Commissioner, T.C.
Memo. 2001-115; Muhich v. Commissioner, T.C. Memo. 1999-192
(addressing the Heritage/Aegis multitrust system), affd. 238 F.3d
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