- 41 - The second factor investigates the presence of any bona fide independent trustee over the entity in question. A nominal trustee will not withstand scrutiny under this factor absent a meaningful role in; i.e., an exercise of control over, the operation of the trust. Gouveia v. Commissioner, T.C. Memo. 2004-256; Norton v. Commissioner, T.C. Memo. 2002-137; Castro v. Commissioner, T.C. Memo. 2001-115. With respect to HGAMC, which employed the term “director” as opposed to “trustee”, Mr. Quay was initially named as such. Nonetheless, his brief, 6-day stint is devoid of meaning for reasons akin to those discussed above in connection with his role as creator. In particular, his lack of even nominal signatory authority over any of the financial accounts opened in the entity’s name belies any true oversight or control. As regards HGRCT, petitioners were from inception designated as the trustees, and no third party was named to the position. The facts thus reveal that petitioners were the sole individuals with operational control over HGAMC and HGRCT, and that their discretion was unfettered by any independent trustee. The third factor looks at whether a genuine economic interest in the trust passed to any beneficiaries other than petitioners. The 100 units of beneficial interest in HGAMC were divided between Mr. Richardson, Mrs. Richardson, and HGRCT. The 100 units of beneficial interest in HGRCT were in turn held byPage: Previous 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 Next
Last modified: May 25, 2011