Colin P. Murphy - Page 4




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         petitioner.4  The CM Trust agreement stated that CM Trust was                
         irrevocable.  The CM Trust agreement also stated that Kevin                  
         Murphy was CM Trust’s settlor and that Michael Murphy and Lester             
         Detterback were CM Trust’s trustees.                                         
              Ovation is an Illinois general partnership that was formed              
         on October 27, 2000, and that was liquidated on December 20,                 
         2000.  Ovation’s listed owners were four single-member limited               
         liability companies (LLCs).  The LLCs, their members, and their              
         interests in Ovation were as follows:                                        
         LLC                      Member             Interest                         
         Fender Trading, LLC       Kevin Murphy                 68%                   
         CPM Gibson Trading, LLC   CM Trust                     13                    
         Martin Trading, LLC       Christopher Murphy Trust     13                    
         Ibanez Trading, LLC       Michael Murphy                6                    
              On August 31, 2001, petitioner filed his 2000 Federal income            
         tax return.  The return reported CM Trust’s tax attributes (e.g.,            
         income and deductions) as if CM Trust was petitioner’s grantor               
         trust; i.e., the return reported the items as if they had been               
         realized directly by petitioner.  On September 9, 2001, CM Trust             
         filed a 2000 Form 1041, U.S. Income Tax Return for Estates and               
         Trusts, reporting that CM Trust was petitioner’s grantor trust               
         for Federal income tax purposes.  The trust return included a                
         “GRANTOR LETTER” identifying petitioner as the grantor of CM                 
         Trust and stated on its face that “UNDER THE TERMS OF THE TRUST              

               4 The CM Trust agreement lists petitioner’s name with two              
          “l”s instead of one.                                                        





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