                          T.C. Memo. 2000-73



                       UNITED STATES TAX COURT



      BANANA MOON TRUST, J.C. CHISUM, TRUSTEE, AND PURPLE
      PASSION TRUST, J.C. CHISUM, TRUSTEE, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 514-99.                          Filed March 3, 2000.



     Jimmy C. Chisum, for petitioners.

     Richard A. Rappazzo, for respondent.



                          MEMORANDUM OPINION


     CHIECHI, Judge:    This case is before the Court on respon-

dent's motion to dismiss for lack of jurisdiction (respondent’s

motion).   We shall grant respondent’s motion.
                                 - 2 -


                              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 Banana Moon Trust filed a Federal income tax

return for estates and trusts, Form 1041 (return), for 1995 which

was signed by Jimmy C. Chisum (Mr. Chisum) as the fiduciary or

officer representing the fiduciary.      Banana Moon Trust’s 1995

return did not contain the name of the trustee or any information

that would enable respondent to determine who the trustee was.

     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
                                 - 3 -


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 peti-

tioners state that they are “executed under the laws of the

Constitution for the United States of America and the Constitu-

tion 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. * * *

       *      *       *       *          *      *       *

          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,
                         - 4 -


wise, necessary, or appropriate by the Board [of Trust-
ees].

   *       *       *       *       *         *       *

     14. The Creator shall appoint a Fiduciary to
serve as “Protector” of the Beneficiaries. The Protec-
tor shall be an independent third party with no obliga-
tions 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. * * *

   *      *       *       *       *       *      *

     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 expira-
tion 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 investi-
gate the complaint.

   *      *       *       *       *      *       *
                                   - 5 -


                    2. The Committee shall have the power,
     upon meeting, investigation, and a two-thirds (2/3)
     majority vote, to remove the Trustee for the following
     specific reasons constituting proper cause: a) insol-
     vency, b) negligence, c) incompetence, or d) failure to
     perform fiduciary duties under the terms of the Con-
     tract.

        *      *      *        *           *       *      *

               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 affi-
     davit, 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.

     The notice of deficiency (notice) issued to petitioner

Banana Moon Trust for taxable years 1994 and 1995 was addressed

as follows:

     BANANA MOON TRUST
     SUGARTREE LLC TTEE
     5804 WEST VISTA NO. 347
     GLENDALE, AZ 85301-1341

The notice issued to petitioner Purple Passion Trust with respect

to taxable year 1995 was addressed as follows:

     PURPLE PASSION TRUST
     SUGARTREE LLC TTEE
     5804 WEST VISTA AVENUE NO. 347
     GLENDALE, AZ 85301-1341 040
                               - 6 -


     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 manage-
     ment of the trusts, their internal affairs, concerns
     about their administration, the declaration of rights
     and the determinations of matters involving the trust-
     ees. As the Respondent concedes that these are “Ari-
     zona Trusts” * * *, this issue falls within the exclu-
     sive 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 Trus-
     tee. 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 Supe-
     rior Court here in Arizona, assuming of course the
     Respondent or Respondent’s counsel has standing. The
                              - 7 -


     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 consider-
     ation 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 inter-
     twined with the merits.”) (Emphasis added)

     The Court held a hearing on respondent’s motion, at which

Mr. Chisum appeared on behalf of petitioners.1   At that hearing,

Mr. Chisum contended, inter alia:

     I was one of the members of Sugar Tree, LLC, and subse-
     quently substituted the trustee to give a better con-
     trol in the tax matters and in the business administra-
     tion.



     1
      At the hearing, the Court informed Mr. Chisum that its
allowing him to appear at the hearing on behalf of each
petitioner did not mean that the Court agreed that he in fact had
the capacity to be appearing on their behalf.
                              - 8 -


          The fact that this trust is again administered
     within the State of Arizona, it comes under the exclu-
     sive jurisdiction of the courts of Arizona and the law
     of Arizona for determining the real parties. * * *

         *      *       *       *        *        *     *

          There was [sic] subsequent items, subsequent
     trustee replacements that are not a part of the record.
     The role of protector that the Respondent brings up is
     only one of the methods of removal of a trustee. Any
     trustee has the authority and the power to resign at
     any time. * * *

Petitioners presented no additional contentions and proffered no

evidence at the hearing on respondent’s motion.

                            Discussion

     Rule 602 provides in pertinent part:

          (a) Petitioner: (1) Deficiency or Liability
     Actions: A case shall be brought by and in the name of
     the person against whom the Commissioner determined the
     deficiency (in the case of a notice of deficiency)
     * * * or by and with the full descriptive name of the
     fiduciary entitled to institute a case on behalf of
     such person. See Rule 23(a)(1). A case timely brought
     shall not be dismissed on the ground that it is not
     properly brought on behalf of a party until a reason-
     able time has been allowed after objection for ratifi-
     cation by such party of the bringing of the case; and
     such ratification shall have the same effect as if the
     case had been properly brought by such party. * * *

         *      *       *       *        *        *     *

          (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 juris-
     diction from which such person's authority is derived.


     2
      All Rule references are to the Tax Court Rules of Practice
and Procedure.
                                - 9 -


     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 peti-

tioner 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, each petitioner has the burden of

proving that this Court has jurisdiction, see Fehrs v. Commis-

sioner, 65 T.C. 346, 348 (1975); National Comm. to Secure Justice

     3
      Assuming arguendo, as the respective governing trust
documents pertaining to petitioners suggest, that each petitioner
is a trust, the administration of which is subject to the laws of
the State of Nevada, under Nevada law, see Rule 60(c), a trustee
has the power to commence litigation on behalf of a trust if the
trust instrument so provides. See Nev. Rev. Stat. Ann. secs.
163.260 and 163.375 (Michie 1993). The respective governing
trust documents pertaining to petitioners stated in pertinent
part that the board of trustees of each petitioner trust was to
have “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.”
                              - 10 -


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. Commis-

sioner, 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 exclu-

sive 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.4

     To reflect the foregoing,

                                      An order of dismissal for lack

                                 of jurisdiction granting respon-

                                 dent’s motion will be entered.




     4
      We have considered all of the contentions and arguments of
petitioners that are not discussed herein, and we find them to be
without merit and/or irrelevant.
