Ain’t Nobody Happy

This was my lodestar from childhood’s earliest hour, and remains so. And it clearly obtains forcefully in Judge Ronald L. (“Ingenuity”) Buch’s court, as he denies summary J to IRS in Jeffrey D. Hoyal and Lori D. Hoyal, Docket No. 6791-20, filed 9/25/23.

Jeff and Lori ran their businesses through various vehicles, but we’re concerned with Crater Lake Trust, an irrevocable. During years at issue, Jeff was trustee, and beneficiary was Jeff’s Momma, Dawna. IRS wants to collapse the trust and send all tax incidents though to Jeff per Section 671, on an assignment of income theory: the trust really belonged to Jeff. IRS claims, per Section 674, Jeff could do what he wanted with trust corpus and income, there being no party adverse to Jeff or any nonadverse party.

IRS relies on the provisions of the trust instrument. Jeff and Lori claim questions of fact: was Momma Dawna an adverse party; did she provide “approval or consent” to what Jeff did or didn’t do, per Section 674(a); did Jeff part with command and control over the trust property or income; and was Momma Dawna the sole beneficiary of the trust?

“The Hoyals and Crater Lake Trust argue that Dawna Hoyal is an adverse party that had approval power and used that power. They contend that she is an adverse party because she was the beneficiary of Crater Lake Trust during the years in issue. And they contend that she had approval power because she approved all major decisions about Crater Lake Trust’s investments and sale of property, and she reviewed and signed its tax returns. The Hoyals and Crater Lake Trust rely on the deposition of Dawna Hoyal…. and the deposition of Jeffrey Hoyal… as support for their argument that Dawna Hoyal had approval power.” Order, at pp. 3-4.

That’s enough for Judge Ingenuity Buch. Just relying on the written word of the trust instrument isn’t enough.

No summary J.