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Some of the facts have been stipulated and are so found.
The stipulation of facts and the attached exhibits are
incorporated herein by reference. Petitioners resided in
Vacaville, California, when they filed this petition. Petitioner
trusts both used addresses in Lansing, Michigan, on their Tax
Court petitions.
In 1998, with the assistance of National Trust Services
(NTS), petitioners established the G. Kierstead Family Holdings
Trust and the G. Kierstead Family Trust. Petitioner Glenn
Kierstead assigned all rights to his lifetime services and future
earnings to the trusts. Petitioners deducted inter alia their
personal living expenses and depreciation of their residence on
Form 1041, U.S. Income Tax Return for Estates and Trusts, filed
for the years at issue.
In early 2001, upon learning that one of the promoters of
NTS stole money from an investment promoted by NTS, petitioners
sought advice about the legality of the trusts from attorney
David Kallman. Mr. Kallman provided petitioners with information
about the classification of business trusts for Federal income
tax purposes. He advised petitioners to consult David Carter, an
attorney who is also a certified public accountant (C.P.A.)
regarding the income tax issues of the trusts. At petitioners’
request, Mr. Kallman amended the terms of the trusts in July
2001.
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