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Banana Moon Trust v. C.I.R. T.C. Memo. 2000-73; 2000 WL 236465 (U.S.Tax
Ct.); 79 T.C.M. (CCH) 1601; T.C.M. (RIA) 2000-073; 2000 RIA TC Memo 2000-073 March 3, 2000. ASSOCIATED
CASE: Jeff Burger
Productions, LLC v. C.I.R., T.C.
Memo. 2000-72 COUNSEL:
Jimmy C. Chisum, for
petitioners. MEMORANDUM
OPINION JUDGE:
CHIECHI, J.
Background For purposes of
respondent’s motion, the parties do not dispute the following factual
allegations that are part of the record. At all relevant times, each petitioner
was a trust engaged in business in the State of Arizona.
Petitioner Purple
Passion Trust filed a return for 1995 which was signed by Mr. Chisum as the
fiduciary or officer representing the fiduciary. That return did not contain
the name of the trustee or any information that would enable respondent to
determine who the trustee was. Upon
commencement of the examination of each petitioner, respondent requested
complete copies of the trust documents relating to each such petitioner as well
as other information. Each petitioner refused to provide respondent with the
trust documents and other information requested. Although
neither petitioner provided respondent with the documentation and other
information requested, respondent’s examining agent obtained from an
unrelated third-party financial institution what appear to be the governing
trust documents for petitioner Banana Moon Trust and the governing trust
documents for petitioner Purple Passion Trust. Those governing trust documents
pertaining to each petitioner appear to be identical except for the name of
each petitioner reflected therein. The respective
governing trust documents relating to petitioners state that they are
“executed under the laws of the Constitution for the United States of
America and the Constitution for the State of Nevada”. Those documents
identify the original trustee of each petitioner as Sugartree, LLC. The
respective governing trust documents relating to petitioners further provide in
pertinent part: 1. The
Anglo-Saxon Common Law Irrevocable Pure Trust for Asset Protection Purposes, also
known as an Asset Protection Trust, created by this Contract and Indenture on
this 30th day of September, 1994, is authorized to exist and function by and
through its Board of Trustees (hereinafter referred to as the Board) pursuant
to all of the conditions contained herein, with certain assets to be
administered by the Trustee for the benefit of the Holders of Capital Units
(hereinafter referred to as Beneficiaries) represented by Certificates of
Beneficial Interest, in accordance with the unalienable Anglo-Saxon Common Law
rights afforded to man. * * * * * * * * * * * * * * * B. Removal.
Upon complaint for proper cause by any agent or person appointed by the Trust,
the Protector shall appoint a Committee of Arbitrators (hereinafter referred to
as the Committee), to investigate the complaint. * * * * * * D. Court
Appointment. In the event it becomes necessary to litigate the removal of a
Trustee and/or appointment of a Successor Trustee, the Trust, by and through
its Beneficiaries, may apply to a court of competent jurisdiction for the
appointment of a Successor Trustee. The notice of
deficiency (notice) issued to petitioner Banana Moon Trust for taxable years
1994 and 1995 was addressed as follows: BANANA MOON TRUST The notice
issued to petitioner Purple Passion Trust with respect to taxable year 1995 was
addressed as follows:
Banana Moon
Trust and Purple Passion Trust jointly filed a petition in this Court. That
petition was signed on behalf of each petitioner by J.C. Chisum as
“Trustee”. Respondent’s
motion contends in pertinent part: 14. There is
absolutely no evidence from which the Court can adduce that Mr. Chisum is the
current trustee of either of the petitioner trusts. 15. Petitioners
have provided no evidence that the appointment of Mr. Chisum (as trustee) was
valid or authorized under the terms of the respective trust indentures * * *. 16. * * *
petitioners have failed to demonstrate that Mr. Chisum was legally appointed as
trustee of either of the petitioner trusts and therefore, [is] authorized to
act on behalf of the petitioner trusts and bring the instant case before this
Court. See T.C. Rule 60(c). Petitioners
filed a response to respondent’s motion in which they ask the Court to
deny that motion. That response asserts in pertinent part: 3. The
Respondent’s objection goes to the management of the trusts, their
internal affairs, concerns about their administration, the declaration of
rights and the determinations of matters involving the trustees. As the
Respondent concedes that these are “Arizona Trusts” * * *,
this issue falls within the exclusive jurisdiction of the superior court here
in the State of Arizona. See A.R.S. § 14-7201. At this point, this
court is without jurisdiction to determine whether * * * Mr. Chisum is the duly
authorized Trustee. The Petitioners need not remind the Court of the
consequences of taking any action over which subject matter is completely
lacking. 4. Any
objection the Respondent or Respondent’s counsel has in this area must
be taken up in the Superior Court here in Arizona, assuming of course the
Respondent or Respondent’s counsel has standing. The irony is of
course, if Respondent or Respondent’s counsel does take the matter up
with the Superior Court, where the Respondent will have the burden of proof,
and if the Superior Court finds that the Trusts are valid, then the Respondent
will be barred by res judicata from asserting the sham trust claim that forms
the basis for his deficiency determination. 5. * * * In essence the factual
claims raised by the Motion to Dismiss are inextricably intertwined with the
facts going to the merits of the Commissioner’s sham trust claim at
issue in this case. If the Trusts are valid, then Mr. Chisum, under Arizona
Law, will be presumed to be the duly authorized trustee, whether it is as a
Trustee of a resulting trust, constructive trust or expressed [sic] trust.
Therefore, the only course available to this Court is to defer consideration of
the jurisdictional claims to the trial on the merits. Farr v. United States, 990 F.2d 451, * * * [454] n. 1 (9th
Cir., 1993). Careau Group v. United Farm Workers [of Am.], 940 F.2d 1291, 1293 (9th Cir.1991).
See also Rosales v. United States, 824 F.2d 799, 803 (9th Cir.1987) (“A * *
* [district] court may hear evidence and make findings of fact necessary to
rule on the subject matter jurisdiction question prior to trial, if the
jurisdictional facts are not intertwined with the merits.”) (Emphasis
added) The Court held
a hearing on respondent’s motion, at which Mr. Chisum appeared on
behalf of petitioners. [FN1] At that hearing, Mr. Chisum contended, inter alia:
I was one of the members of Sugar Tree, LLC, and
subsequently substituted the trustee to give a better control in the tax
matters and in the business administration. The fact that this trust is again administered
within the State of Arizona, it comes under the exclusive jurisdiction of the
courts of Arizona and the law of Arizona for determining the real parties. * *
* * * * Petitioners
presented no additional contentions and proffered no evidence at the hearing on
respondent’s motion. Discussion Rule 60 [FN2]
provides in pertinent part:
* * * The respective
governing trust documents pertaining to petitioners suggest that each
petitioner was organized as a trust under the laws of the State of Nevada.
However, in petitioners’ response to respondent’s motion and
at the hearing on that motion, Mr. Chisum asserted that the administration of
each petitioner trust is governed by the laws of the State of Arizona and that
the exclusive jurisdiction in determining the validity of the trust and of the
trustee is in the Superior Court of the State of Arizona. Assuming
arguendo, as petitioners claim, that each petitioner is a trust, the
administration of which is subject to the laws of the State of Arizona, under
Arizona law, see Rule 60(c), a trustee has the power to commence litigation on
behalf of a trust. [FN3] See Ariz.Rev.Stat. Ann. sec. 14-7233.C.25. (West
1995). In the instant case, each petitioner has the burden of proving that this
Court has jurisdiction, see Fehrs v. Commissioner, 65 T.C. 346, 348 (1975);
National Comm. to Secure Justice in the Rosenberg Case v. Commissioner, 27 T.C.
837, 839 (1957), by establishing affirmatively all facts giving rise to our
jurisdiction, see Wheeler’s Peachtree Pharmacy, Inc. v.
Commissioner, 35 T.C.
177, 180 (1960); Consolidated Cos., Inc. v. Commissioner, 15 B.T.A. 645, 651 (1929). In order to
meet that burden, each petitioner must provide evidence establishing that Mr.
Chisum has authority to act on its behalf. See National Comm. to Secure Justice
in the Rosenberg Case v. Commissioner, supra at 839-840; Coca-Cola Bottling Co. v.
Commissioner, 22 B.T.A.
686, 700 (1931). We reject petitioners’ position that under Arizona
law the validity of the purported appointment of Mr. Chisum as trustee of each
petitioner falls within the exclusive jurisdiction of the courts of the State
of Arizona.
On the record
before us, we find that each petitioner has failed to establish that Mr. Chisum
is authorized to act on its behalf. [FN4]
An order of
dismissal for lack of jurisdiction granting respondent’s motion will
be entered. |