Jeff Burger Prods., Inc. v. Commissioner

MEMORANDUM OPINION

CHIECHI, JUDGE: This case is before the Court on respondent's motion to dismiss for lack of jurisdiction (respondent's motion). We shall grant respondent's motion.

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, Jeff Burger Productions, LLC (Jeff Burger Productions), was a limited liability company that is taxed as a partnership because it did not make an election to be taxed as a corporation. Jeff Burger Productions filed partnership income tax returns, Forms 1065 (returns), for taxable years 1994 and 1995. In those returns, it was indicated that there were two partners/members of Jeff Burger Productions, i.e., Banana Moon Trust and Purple Passion Trust. Consequently, the provisions of sections 6221 through 6234 apply. ¹

*80 Respondent issued a Notice of Final Partnership Administrative Adjustment which was addressed as follows:

JEFF BURGER

TAX MATTERS PARTNER

JEFF BURGER PRODUCTIONS LLC

40 EAST TONTO RIM DRIVE

SEDONA, AZ 86351-7880

J.C. Chisum (Mr. Chisum) timely mailed to the Court a petition purportedly filed on behalf of Jeff Burger Productions. Mr. Chisum identified himself in the petition as trustee of Banana Moon Trust. Mr. Chisum further represented in the petition that Banana Moon Trust is the tax matters partner (TMP) for Jeff Burger Productions. Banana Moon Trust was formed under the laws of the State of Arizona.

Upon commencement of the examination of the returns filed by Jeff Burger Productions for taxable years 1994 and 1995, respondent requested complete copies of the trust documents relating to Banana Moon Trust, the purported TMP for Jeff Burger Productions, as well as other information. Petitioner refused to provide respondent with the trust documents and other information requested.

Respondent's motion contends in pertinent part:

     14. There is absolutely no evidence from which

   the Court can adduce that Mr. Chisum*81 is the current

   trustee of Banana Moon Trust.

     15. Petitioner * * * [has] provided no evidence

   that the appointment of Mr. Chisum (as trustee) was

   valid or authorized under the terms of the trust

   indenture * * *.

     16. * * * petitioner * * * [has] failed to demonstrate that

   Mr. Chisum was legally appointed as trustee of Banana Moon Trust

   and therefore, [is] authorized to act on behalf of Banana Moon

   Trust (as TMP) and bring the instant case before this Court. See

   T.C. Rule 60(c).

     17. The capacity of Mr. Chisum to act under

   Arizona law and bring the instant suit in this Court,

   likewise, has not been established.

Petitioner filed a response to respondent's motion in which it asks the Court to deny that motion. That response asserts in pertinent part:

   3. The Respondent's objection goes to the management of the

Trust, its internal affairs, concerns about its administration, the

declaration of rights and the determinations of matters involving the

trustee. As the Respondent concedes that these are "Arizona Trusts"

[sic] * * *, this*82 issue falls within the exclusive jurisdiction

of the superior court here in the State of Arizona. See A.R.S.

section 14-7201. At this point, this court is without jurisdiction to

determine whether * * * [Mr. Chisum] is the duly authorized Trustee.

The Petitioner 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 [sic] 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*83 are [sic] 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 that hearing, Mr. Chisum appeared as trustee for Banana Moon Trust, the purported TMP of Jeff Burger Productions. ² Petitioner proffered no evidence and presented no new arguments at that hearing. Respondent introduced into evidence at the hearing on respondent's motion documents that appear to*84 be the governing trust documents for Banana Moon Trust, the purported TMP of Jeff Burger Productions, which respondent's examining agent obtained from an unrelated third-party financial institution. Those governing trust documents 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 Banana Moon Trust as Sugartree, LLC. The governing trust documents relating to Banana Moon Trust 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*85 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. * * *

           *   *   *  *   *   *   *

       6. This Trust shall be originally domiciled in

    the State of Nevada, and shall be interpreted and

    construed under the Constitution of the United States

    and the laws of the State of Nevada. The domicile, and

    thereby the controlling interpretational laws under

    which the Trust shall be construed, may be changed to

    any other State or Nation as shall be deemed prudent,

    wise, necessary, or appropriate by the Board [of Trustees].

*86            *   *   *   *   *   *   *

       14. The Creator shall appoint a Fiduciary to

    serve as "Protector" of the Beneficiaries. The Protector

    shall be an independent third party with no obligations to

    any other party to this Trust. The Protector shall have the

    power to remove any Trustee who violates any term or

    condition of this Trust agreement, or is in breach of any

    Anglo-Saxon Common Law Trustee duty, and shall have the power

    to appoint a Successor Trustee to fill any vacancy which

    occurs for any reason.

          *   *   *   *   *   *   *

       16. The Board [of Trustees] shall have, except as

    modified by the terms of this Indenture and the Minutes

    of the Board interpreting the same, all of the powers

    of Trustees under the Anglo-Saxon Common Law, as well

    as those specified under the laws of the State of

    Nevada. * * *

           *   *   *   *   *   *   *

   *87     33. The Trustee may be replaced in any of the

    following manners:

         A. Resignation. The Trustee may resign with

    or without cause at any time by sending a notice of his

    intention to do so to the Trust principle [sic] office

    by Certified Mail. However, such resignation shall not

    be effective unless and until such time as a Successor

    Trustee has accepted the appointment to assume the

    duties and responsibilities of Trustee on the expiration

    date of the outgoing Trustee, or thirty days after

    receipt of the resignation, whichever occurs first.

         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.

           *   *   *   *   *   *   *

          2. The Committee shall have the power,

   upon meeting, investigation, and a two-thirds*88 (

           *   *   *   *   *   *   *

        C. Incapacitation. In the event the Trustee

   is unavailable to participate in the process of his

   removal or the selection of a Successor Trustee, the

   Protector shall have the authority to execute an affidavit,

   under oath, setting forth the unavailability of the Trustee.

   * * *

        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.

DISCUSSION

  Rule 60 provides in pertinent part:

     (c) Capacity: * * * The capacity of a fiduciary

   or other representative to litigate in the Court shall

   be determined in accordance with the law of the jurisdiction

   from which such person's authority is derived.

   The governing trust documents pertaining to Banana Moon

Trust, the purported*89 TMP of Jeff Burger Productions, suggest that Banana Moon Trust was organized as a trust under the laws of the State of Nevada. However, in petitioner's response to respondent's motion and at the hearing on that motion, Mr. Chisum asserted that the administration of Banana Moon Trust is governed by the laws of the State of Arizona and that the exclusive jurisdiction in determining the validity of the trustee is in the Superior Court of the State of Arizona.

Assuming arguendo, as petitioner claims, that Banana Moon Trust, the purported TMP of Jeff Burger Productions, 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. ³ See Ariz.Rev. Stat. Ann. sec. 14-7233.C.25. (West 1995). In the instant case, 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);*90 Consolidated Cos., Inc. v. Commissioner, 15 B.T.A. 645, 651 (1929). In order to meet that burden, petitioner must provide evidence establishing that Mr. Chisum has authority to act on behalf of Banana Moon Trust, the purported TMP of Jeff Burger Productions. See National Comm. to Secure Justice in the Rosenberg Case v. Commissioner, supra 27 T.C. at 839-840; Coca-Cola Bottling Co. v. Commissioner, 22 B.T.A. 686, 700 (1931). We reject petitioner's position that under Arizona law the validity of the purported appointment of Mr. Chisum as the trustee of Banana Moon Trust falls within the exclusive jurisdiction of the courts of the State of Arizona.

*91 On the record before us, we find that petitioner has failed to establish that Mr. Chisum is authorized to act on behalf of Banana Moon Trust, the purported TMP of Jeff Burger Productions. ⁴

To reflect the foregoing,

An order of dismissal for lack of jurisdiction granting respondent's motion will be entered.