Steven E. Vlach and Nancy Vlach, et al. v. Commissioner, T.C. Memo. 2013-116 (4/30/2013)
I'm not going to quote the entire opinion, but here's the meat of it:
And you know where it goes from there. (Yes, the trusts are "shams.")In 1995 Dr. Vlach attended an ATHA [Alternative Therapies Health Association] seminar to learn more about chelation therapy and other alternative medicine practices. Since chelation therapy and many other alternative medicine practices were excluded from traditional medical malpractice insurance, Dr. Vlach like many other ATHA members was concerned with asset protection. ATHA invited an affiliate of the American Society of Trust Planners to present at the seminar. That year Karl Dahlstrom, who was affiliated with the American Society of Trust Planners, presented.
Before 1995 Dahlstrom was involved in several lawsuits memorializing his abusive trust promotions and practices,[6] but Dr. Vlach had never heard of Dahlstrom before the ATHA seminar. Convinced that Dahlstrom offered valuable tax planning and asset protection advice, Dr. Vlach purchased trust documents from Dahlstrom to create the following trusts: San Dee Cristo Trust (San Dee Cristo), Mt. Sophris Trust (Mt. Sophris), and the Charitable Remainder Trust of Ixlandia (Ixlandia).
On December 28, 1995, the Vlachs formed San Dee Cristo and Mt. Sophris using identical trust documents Dahlstrom provided. The trust documents stated that Charles J. Vlach, M.D., Dr. Vlach's father, was the "Creator" and the Vlachs were the "Exchangors." As "exchangors", the Vlachs each received 50 trust certificate units and $10 in exchange for real and personal property. The trust certificates stated that ownership of the certificates did not entitle the holders to any legal or equitable title in trust property or management.
Footnote 6:
[6] For information regarding Dahlstrom's abusive trust practices see Akland v. Commissioner, 767 F.2d 618 (9th Cir. 1985), aff'g T.C. Memo. 1983-249, United States v. Dahlstrom, 713 F.2d 1423 (9th Cir. 1983), and Dahlstrom v. Commissioner, T.C. Memo. 1991-264 and T.C. Memo. 1991-265, aff'd without published opinion, 999 F.2d 1579 (5th Cir. 1993).