Holman v. United States

728 F.2d 462 (1984)

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Holman v. United States

United States Court of Appeals for the Tenth Circuit
728 F.2d 462 (1984)

JC

Facts

Dr. Bruce Holman (plaintiff) and his wife, Audrey, established the Bruce Holman Family Estate, a trust that would hold all of their property and the right to Bruce’s services and future earnings. Bruce and Audrey were trustees, along with Bruce’s mother, who resigned five months after the trust was established. Bruce and Audrey were officers of the trust and were paid consulting fees. Their children and the Bruce Holman Educational and Research Trust were named beneficiaries, and Bruce and Audrey continued to use their property as before, except that the trust paid rent, maintenance on their home, utilities, insurance expenses, and similar expenses. Bruce and Audrey also were free to pay themselves whatever compensation they wished and to do nearly anything they deemed advantageous. The government (defendant) advised Bruce and Audrey that it would not recognize the Bruce Holman Family Estate for income-tax purposes. A tax-code section indicated that the grantor of a trust might be treated as the owner of trust property he enjoyed beneficial enjoyment of or could dispose of, if this power was exercisable by the grantor with or without a nonadverse party and without the approval of any adverse party. The Bruce Holman Family Estate still filed an income-tax return, which included Bruce’s earnings and claimed deductions for Bruce and Audrey’s claimed work as consultants, as well as other personal living expenses. Bruce and Audrey’s personal income-tax returns were audited and increased by the income reported by the trust. After other adjustments, deficiencies were assessed against Bruce and Audrey for taxes, interest, and penalties due to negligence. Bruce and Audrey paid the funds sought and sued for refund. They argued that each was an adverse party to the other, for trust purposes. The trial court granted summary judgment to the government, and Bruce and Audrey appealed.

Rule of Law

Issue

Holding and Reasoning (Per curiam)

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