OPINION
FEATHERSTON, Judge-.
These consolidated cases were assigned to Special Trial Judge Helen A. Buckley pursuant to the provisions of section 7456(d) (redesignated sec. 7443A(b) by sec. 1556 of the Tax Reform Act of 1986, Pub. L. 99-514, 100 Stat. 2755) and Rules 180 and 181.1 The Court agrees with and adopts her opinion which is set forth below.
OPINION OF THE SPECIAL TRIAL JUDGE
BUCKLEY, Special Trial Judge:
Docket No. 22943-83, David C. and Betty B. Burwell, was tried first; subsequently, its record was incorporated by reference into the record in docket No. 9585-84, James L. Harrold. The two cases were consolidated for purposes of briefing and opinion.
Respondent determined deficiencies in Federal income taxes and additions to tax for 1980 and 1981 for the Burwells as follows:
Additions to tax
Year Deficiency Sec. 6653(a) Sec. 6653(a)(1)
1980 $5,360 $268.00
1981 9,904 2$495.20
The Burwells were residents of West Covina, California, when their petition was timely filed.
Respondent determined a deficiency in petitioner Har-rold’s 1982 Federal income tax of $8,872, together with an addition to tax under section 6653(a)(1) in the amount of $444, under section 6653(a)(2) in the amount of 50 percent of the interest due on $8,872, and under section 6661(a) in the amount of $887. Harrold resided in Laguna Hills, California, when he timely filed his petition herein.3
Both cases involve a single main issue: whether petitioners made contributions deductible under section 170(c) to the Universal Life Church, Inc. Subsidiary issues are whether petitioners Burwell are hable for additions to tax under section 6653(a) and section 6653(a)(1); whether petitioner Harrold is hable for additions to tax under sections 6653(a)(1) and (2), and section 6661(a); and lastly, whether damages should be awarded jto the United States under the provisions of section 6673. f
FINDINGS OF FACT
Some of the facts have been stipulated and are so found. The stipulations of facts and attached exhibits are incorporated herein by this reference.
Petitioners in both cases formed “congregations”4 chartered by the Universal Life Church, Inc. (hereafter ULC Modesto). During the years 1980, 1981, and 1982, ULC Modesto was hsted by the Internal Revenue Service in Pubhcation 78, Cumulative List of Organizations Described in Section 170(c) of the Internal Revenue Code of 1954. Under date of August 28, 1984, the Internal Revenue Service announced by news release that ULC Modesto was no longer so listed. Petitioners claimed deductible contributions to ULC Modesto as follows:
Petitioner Year Amount
David C. and Betty B. Burwell 1980 $20,985
1981 25,254
James L. Harrold 1982 24,835
On their returns, the Burwells reported total contributions of $23,771 and $22,468, for 1980 and 1981, respectively. The deduction for 1980 was subject to the 50-percent limitation of sec. 170, and the balance of the deduction was claimed as a carryover to their 1981 year. Respondent disallowed all of the above deductions.
The Burwells, Docket No. 22943-83
David and Betty Burwell were both employed during 1980 and 1981. David was an engineer and Betty a teacher’s aide. They received compensation for services as follows:
1980 1981
David $32,000.00 $48,739.36
Betty 6,108.75 7,014.69
Total 38,108.75 55,754.05
Petitioners’ connections with ULC Modesto5 began in June 1980. Some friends at work, who were ULC Modesto “ministers,” told David about the organization. David and Betty applied for minister’s credentials by mail and they were received at no cost for life from ULC Modesto. There were no educational or other standards required for the credentials.
David started his “congregation” in June 1980, meeting the ULC Modesto requirements that there be three persons over the age of 18 as members of each congregation, that those three persons fill the offices of pastor, secretary and treasurer, and that the pastor be a minister. David selected three persons as his founding members: himself as pastor, his wife, Betty, as secretary, and his eldest son as treasurer.
The Burwells’ congregation, Congregation No. 30470, was formed by the execution of a charter agreement by ULC Modesto. The charter agreement provided, inter alia:
Neither party to this agreement is the general agent of the other. The Universal Life Church, Inc., issues this charter in consideration of the signatories’ promise that they will indemnify, save harmless, and defend the Universal Life Church, Inc., for all liability from damages to persons or property in any suit at law arising out of this agreement.
By this agreement, the Universal Life Church, Inc. hereby authorizes this chartered congregation to open a bank account in the name of the Universal Life Church, Inc.
The Burwells also entered into a congregational agreement with the Church of Universal Harmony, another organization chartered by ULC Modesto. This agreement also reiterated that neither of the groups was the agent of the other or of ULC Modesto. The record does not show the tax status of the Church of Universal Harmony. The Church of Universal Harmony had no authority over Charter No. 30470. However, the Church of Universal Harmony agreed “to defend it [Charter 30470] against all legal attacks upon its organizational status at no expense to the chartered congregation or its directors.” The Burwells paid $23 per month to the Church of Universal Harmony.
The Burwells established a separate bank account for their Charter 30470 at Crocker Bank in the name of Universal Life Church, Inc. They alone and not ULC Modesto chose the bank and determined the account signators. The Burwells were the only persons with signatory power over this account. They also maintained a personal checking account. Expenses paid out of the congregation account consisted of payments inter alia on the Burwells’ house, electricity and gas utilities, water, telephone, automobile expenses, checks to various other Universal Life Church congregations, repavement of the driveway, Roto-Rooter, new doors, pool chemicals and services, automobile insurance, flowers, food, books, life insurance, automobile club dues, automobile licenses, servicing, gas, plumbing, pest control, and the children’s medical expenses.6 In short, the expenses paid from the account were precisely of the same nature as would be paid by any couple, of equivalent financial status, with two children living at home, as had David and Betty, for their everyday living expenditures.
ULC Modesto did not authorize, review or consider the expenditures made from the Charter 30470 account in any way. Under the business practice of Crocker Bank the fact that the account was in the name of Universal Life Church, Inc., did not determine who had signatory authority over the account. That was determined by the signature cards.7
The congregation passed a resolution to help young people with problems. There is no indication in the record that either David or Betty had any special ministerial training and it is clear that ULC Modesto did not require any such training.8 The Burwells spread the word of their availability by attending weekly meetings of the Palmer Drug Abuse Program with their children, meetings with other parents whose children had chemical dependency problems, and through notices posted in bus depots. The Burwells were participating in many of the same sorts of activities prior to their obtaining the ULC charter. No specific activities or educational background are required of ULC Modesto ministers. The ULC Modesto creed is “that we only believe in that which is right, and every person has the right to interpret what is right for themselves.” Rev. Hensley, founder and chairman of the board of ULC Modesto, recommends that they teach what he teaches, and believe what he believes “because I believe I’ve got the truth.”
ULC Modesto provides a variety of courses and information described by Rev. Hensley as follows:
It has [a] charter in it for the university — I mean, of California, but we do not use it. We have our own law school, which you know. We make our own lawyers, and we have several different kind of educational departments.
We have some that’s religious that has Bible courses. We have others that’s metaphysic. And then we have some that’s just way out beyond Cloud 9.
ULC Modesto did not review operations of the Burwells’ charter. ULC Modesto did not receive the use of, or have the ability to use, any of the funds deposited into the charter’s checking account. ULC Modesto did not audit the receipts and expenditures from the checking account nor did it perform any accounting functions in regard thereto.9
James L. Harrold, Docket No. 9585-84
Petitioner James L. Harrold (Harrold) was employed as a contract industrial manufacturing engineer with various aerospace companies, and also had his own consulting business. After reading a newspaper article about ULC Modesto, Harrold wrote to the headquarters in Modesto seeking additional information. In May, 1980, he was licensed as a minister and formed Congregation No. 38116.10 Harrold executed a congregational agreement with the Church of Universal Harmony, but placed no evidence into the record relating to the Church of Universal Harmony or its tax status. >•
Harrold opened bank accounts for Charter 38116, checking and savings. Harrold alone chose the bank and determined the account signator. ULC Modesto played no role in these matters. The resolution to open the account was signed by the three directors of petitioner’s charter: Har-rold, his daughter, and a friend. Harrold was the sole signatory on these accounts.
During 1982, Harrold’s wage income was $51,765. He deposited into the charter bank account the sum of $24,835 during 1982. Harrold wrote checks on the charter account to his daughter, Maureen, labeled as scholarship fund; to an animal hospital for care of his dog;11 to the friend with whom he lived for rent and utilities; for furniture, trash service, vehicle leasing, tuition fees, textbooks, ACLU dues, traffic fine, Blue Cross insurance, medical payments, gasoline, magazine subscriptions, his son, Brian, note payments, taxes on a Pennsylvania property (labeled church retreat), various grocery stores, many checks for cash and so forth. Harrold used this account for his personal, family and living expenses during the year at issue. It is clear, and we find, that he always intended to retain complete control of these accounts and that he always intended to, and did, use them for his own personal living expenses. ULC Modesto did not intend to exercise control over the accounts and it did not exercise such control.12
Prior to 1980, Harrold had taken psychology and human service courses. He continued his practice of counseling alcohol and drug addicted persons and working on a prisoner release program. He wanted to help others. After his ULC Modesto association, Harrold’s volunteer work remained unchanged.13
Harrold performed a baptism, placed a newspaper ad offering counseling, sponsored a baseball team, counseled team members and others, and attempted to help them live in a socially acceptable manner.
1. Motion To Limit Exercise of Jurisdiction
In docket No. 22943-83, the Burwells filed a motion to limit our jurisdiction. In it they contend—
the Court does not have the jurisdiction to determine, on the merits, the identity and extent of the donee organization or whether the donee organization is a qualified organization under section 170(c)(2), except to the extent the Court may take notice that ULC was listed during the taxable years in issue in the Cumulative List of Organizations described in Section 170(c), Publication 78, Treasury Department, Internal Revenue Service.
The gist of their argument is that because ULC Modesto is not a party to this proceeding, it is a violation of the due process of ULC Modesto to adjudicate petitioners’ cases. The Burwells also filed an amendment to their petition, making essentially the same argument.
We agree that ULC Modesto is not a party to this litigation, but we are somewhat bemused by the Burwells’ making this argument since their main argument in these cases has been that they are an integral part of ULC Modesto, that they are one and the same as ULC Modesto. Indeed, Rev. Hensley testified that he could call a meeting of any congregation in the country “because I am the Chairman of any Board of anywhere in the country.” Despite the anomaly of their assertions, the exempt status of ULC Modesto is not at issue here. The issue to be decided is whether respondent’s determination of the disputed deficiencies was erroneous and that turns on whether the Burwells made deductible contributions to an organization qualified under section 170(c). The Burwells’ motion will be denied.
It is not necessary for this Court to make any determination in these cases in regard to the tax status of ULC Modesto, a matter we leave to the U.S. Claims Court where that issue is now pending.14
2. Petitioners’ “Contributions”
Petitioners in both cases contend that the bank accounts into which they deposited the amounts for which they claimed contribution deductions in fact belonged to ULC Modesto, and from this they argue that they are entitled to the deductions claimed.
Petitioners’ only possible statutory basis for a deduction turns upon the provisions of section 170(a) which allows a deduction for “any charitable contribution (as defined in subsection (c)) payment of which is made within the taxable year.” Subsection (c) defines “charitable contribution” to mean “a contribution or gift to or for the use of” certain entities organized and operated exclusively for, inter aha, religious or charitable purposes, no part of the net earnings of which inures to the benefit of any individual.
Neither the statute nor the regulation defines what is meant by “contribution or gift.” Foster v. Commissioner, 80 T.C. 34, 222 (1983), affd. on this issue 756 F.2d 1430 (9th Cir. 1985). The expression “charitable contribution” as used in section 170 is synonymous with the word “gift.” Sec. 170(c); DeJong v. Commissioner, 36 T.C. 896, 899 (1961), affd. 309 F.2d 373 (9th Cir. 1962). A gift is the by-product of “detached and disinterested generosity” given “out of affection, respect, admiration, charity or like impulses.” Commissioner v. Duberstein, 363 U.S. 278, 285 (1960). A gift lacks legal or moral obligation and the inducement of anticipated benefit. Commissioner v. Duberstein, supra at 286.
We stated our own test in DeJong v. Commissioner, supra at 899:
A gift is generally defined as a voluntary transfer of property by the owner to another without consideration therefor. If a payment proceeds primarily from the incentive of anticipated benefit to the payor beyond the satisfaction which flows from the performance of a generous act, it is not a gift. * * *
Whether a donation has been made is a question of fact. Johnson v. Commissioner, 48 T.C. 636, 639 (1967). We find that petitioners never intended to make, and in fact never did make, contributions to ULC Modesto.
Petitioners would have us believe that they gave substantial sums to ULC Modesto by depositing them in accounts bearing the name Universal Life Church, Inc. They have submitted numerous canceled checks in their futile attempt to prove this contention. In examining their intention in regard to these transfers, we find these transactions were not gifts. By those checks, petitioners transferred funds into bank accounts which were nominally in the name of Universal Life Church, Inc., but with respect to which they alone had signatory authority. Despite their testimony that they believed ULC Modesto could take over these accounts — testimony we find incredible — petitioners believed that they had full and complete control of the bank accounts. This is evidenced clearly by the checks which they wrote on the accounts. They used these accounts as any individual would use their personal checking accounts. They paid house mortgages, rent, utility costs, automobile costs, property tax bills, insurance bills, medical bills, school tuition, textbook costs, and so forth. None of the petitioners placed the bank deposits beyond their dominion and control.
Petitioners were not motivated by “detached and disinterested generosity” in their so-called gifts. They were instead motivated, at the expense of the fisc of the United States, by greed inspired by the ULC Modesto whose interest was to “flood the country with Churches, and we’ll all become tax-exempt.”15 Petitioners made no contributions to ULC Modesto. They simply transferred funds from their private accounts to accounts labeled Universal Life Church, Inc. They retained complete dominion and control over these funds and they utilized them for their own private purposes. The transfers were not, therefore, contributions within the meaning of sec. 170. Wedvik v. Commissioner, 87 T.C. 1458 (1986); Svedahl v. Commissioner, 89 T.C. 245 (1987).
Section 262 provides “Except as otherwise expressly provided in this chapter, no deduction shall be allowed for personal, living, or family expenses.” Petitioners cannot, through their mail-order “churches,” translate their personal expenses into deductible charitable contributions. We are reminded of the pithy language of Judge Kaufman of the Second Circuit in Mone v. Commissioner, 774 F.2d 570 (1985), affg. a Memorandum Opinion of this Court:
Every year, with renewed vigor, many citizens seek sanctuary in the free exercise clause of the first amendment. They desire salvation not from sin or from temptation, however, but from the most earthly of mortal duties — income taxes. * * *
To the extent that petitioners made payments to the Church of Universal Harmony, the evidence reveals that such payments were for bookkeeping assistance and like matters. Apart from the fact that the record does not show that organization was a qualified one, such payments cannot constitute contributions, as petitioners expected a commensurate benefit in return. See, e.g., Hernandez v. Commissioner, 819 F.2d 1212 (1st Cir. 1987), affg. an unreported decision of this Court; Murphy v. Commissioner, 54 T.C. 249 (1970); DeJong v. Commissioner, supra.
3. Private Inurement
Section 170, in defining a charitable contribution or gift, limits deductibility to gifts made to those certain organizations “no part of the net earnings of which inures to the benefit of any * * * individual.” Had we held that petitioners in fact had made gifts to ULC Modesto, we would nonetheless refuse to allow the deductions in question. The pervasive use of the so-called ULC Modesto accounts by all petitioners herein for purely personal and family expenses clearly results in self-inurement to them of a type which would result in any such organization falling outside the statutory guidelines for the allowance of the deduction. See, e.g., Smith v. Commissioner, 800 F.2d 930 (9th Cir. 1986), affg. a Memorandum Opinion of this Court; Davis v. Commissioner, 81 T.C. 806 (1983), affd. by unpublished opinion, 767 F.2d 931 (9th Cir. 1985); Miedaner v. Commissioner, 81 T.C. 272 (1983).
4. One Universal Life Church Organization
Our holding above that none of these petitioners made contributions to a tax-exempt entity when they transferred funds into the bank accounts, as a practical matter, resolves the substantive issues in these cases. We nevertheless proceed to consider what was to be petitioners’ main argument in these cases: that the various congregations affiliated with ULC Modesto Eire in fact one and the same as ULC Modesto and thus they fall within the tax-exempt status of ULC Modesto during the years in question. We have considered and rejected this argument in cases too numerous to mention. Thus, in Davis v. Commissioner, supra at 815, we held that “ULC Modesto’s exemption is not a group exemption” citing numerous holdings to like effect in Memorandum Opinions. See also Smith v. Commissioner, supra; Universal Life Church (Full Circle) v. Commissioner, 83 T.C. 292 (1984).
The Ninth Circuit, in Hall v. Commissioner, 729 F.2d 632 (9th Cir. 1984), affg. a Memorandum Opinion of this Court, in considering another so-called contribution to ULC Modesto under circumstances almost identical to those at bar, stated (p. 634), “The courts have repeatedly held that exemptions for parent churches do not automatically carry over to local congregations.” See also Rager v. Commissioner, 775 F.2d 1081 (9th Cir. 1985), affg. a Memorandum Opinion of this Court; Kalgaard v. Commissioner, 764 F.2d 1322 (9th Cir. 1985), affg. a Memorandum Opinion of this Court.
Nevertheless, we once again consider the question in light of the testimony of petitioners’ expert witness on business organizations. Petitioners argue that as a matter of law, their congregations are a part of ULC Modesto, somewhat akin to that of a corporation with separate divisions or branch offices. Petitioners, in support of their thesis, offered the testimony of an expert in business organizations and associations. He concluded that, because the various congregations are formed under the authority of a ULC Modesto resolution, operate under the ULC Modesto name, and write checks on accounts labeled Universal Life Church, Inc., they are one and the same organization. He analogized each petitioner as a sole shareholder in a corporation, with the signatory power to disburse the corporate funds. He was also impressed by the fact that the ULC Modesto bylaws provided that any ordained ULC Modesto minister was an associate member of the “church” (ULC Modesto), and as such, that person had a duty to use church funds for the good and for purposes of the organization. The fact that the funds might not have been so used, he opined, merely served to indicate a breach of fiduciary responsibility, not a change in the perceived relationship between ULC Modesto and its congregations. Petitioners’ expert arrived at his conclusions by reviewing the paper record between ULC Modesto and the congregations. We, however, take a different approach.
For purposes of Federal income tax law, the substance of a transaction rather than its form is controlling. Kingsbury v. Commissioner, 65 T.C. 1068, 1083, 1085 (1976); Gregory v. Helvering, 293 U.S. 465 (1935). The test is what the parties intended, their agreement, and their conduct in executing its provisions. Commissioner v. Culbertson, 337 U.S. 733, 742 (1949). Other than the self-serving testimony of petitioners, the record fails to reveal that they forwarded reports of their activities to ULC Modesto; it fails to reveal any review by ULC Modesto of any of the activities of petitioners; it fails to reveal any dominion or control by ULC Modesto over the person, assets, or activities of these petitioners, or any legal right to do so. What the record does reveal is a pattern of petitioners continuing their various activities in life — personal, social, professional, and economic — in the same manner after adopting the charter of ULC Modesto as they had conducted themselves prior to their accession to ministerial credentials and charter hood.16 We can only conclude that these petitioners were, through utilization of ULC Modesto and the mails, attempting to translate their everyday life expenses into deductible contributions. We will not, by closing our eyes to reality, allow a paper trail to transform illusion into a tax deduction. As we stated in Miedaner v. Commissioner, 81 T.C. at 281, “The church account was simply a magic wand whereby personal expenses were converted into tax deductions.”
5. Additions to Tax
Petitioners did not address any of the additions to tax in their briefs but devoted their entire argument to their claim for the deductions. We are not sure whether their briefs were intended to concede the additions to tax or whether their failure to discuss them was an oversight. We shall, therefore, discuss each addition to tax briefly.
(a) Section 6653
Respondent determined that petitioners are liable for the additions to tax under section 6653(a). The burden of proving these additions were improper rests on petitioners and they have failed to meet their burden. They have failed to show that the underpayments were not due to negligence or intentional disregard of rules and regulations. See Hall u. Commissioner, 729 F.2d at 635. Petitioners must have known that they could not convert their personal expenses into deductions by the simple expedient of setting up their bank account in the name of the Universal Life Church, Inc. We find that petitioners were negligent in claiming these deductions, and in the case of petitioner Harrold, that all of the underpayment of tax was due to negligence.
(b) Section 6661
Respondent determined that petitioner Harrold was liable for the addition to tax under the provisions of section 6661(a).17 That section as applicable to returns due to be filed after 1982 imposes an addition to tax in an amount equal to 10 percent of the amount of any underpayment attributable to a substantial understatement of income tax. “Understatement” is defined as the excess of the amount of tax required to be shown on a return over the amount of tax actually shown on a return. An understatement is “substantial” when it exceeds the greater of $5,000 or 10 percent of the tax required to be shown on the return. Thus, there was a substantial understatement, within the meaning of section 6661, in Harrold’s 1982 return.
The statute goes on, however, to provide that under certain circumstances, there may be a reduction in the amount of the understatement. Thus, section 6661(b)(2)(B) provides as follows:
(B) Reduction fob. understatement due to position of taxpayer OR DISCLOSED item. — The amount of the understatement under subparagraph (A) shall be reduced by that portion of the understatement which is attributable to—
(i) the tax treatment of any item by the taxpayer if there is or was substantial authority for such treatment, or
(ii) any item with respect to which the relevant facts affecting the item’s tax treatment are adequately disclosed in the return or in a statement attached to the return.
Harrold has made no attempt to show that there was substantial authority for his position and can take no comfort in that provision.18 Indeed, all of the authority is against the position taken by Harrold. He therefore is not entitled to reduce the amount of his substantial understatement of income tax on this ground.
We therefore consider whether the amount of understatement of income tax may be reduced because of the statutory provision for reduction as to items with respect to which the relevant facts affecting the item’s tax treatment are adequately disclosed in the return. Harrold’s return shows a contribution to “Universal Life Church, Inc. Modesto, Ca.” in the amount of $24,835. We hold that petitioner’s so-called return disclosure was a false and misleading statement. In April of 1983, when the return was filed, ULC Modesto was listed by the Internal Revenue Service as an organization exempt from tax under the provisions of section 501(c)(3), contributions to which were deductible under section 170. Petitioner’s objective evidently was to induce an examining revenue agent to accept the return as filed. Harrold knew as a fact that he had not sent any funds to ULC Modesto and that he alone had signatory power over the accounts. No one other than Harrold had control over these accounts. He used them for his personal living expenses. The representation on the return that he had made a contribution to ULC Modesto was thus not only potentially misleading to an examining revenue agent but was not true. Harrold not only failed adequately to disclose but misrepresented “the relevant facts affecting the item’s tax treatment” within the meaning of section 6661(b)(2)(B)(ii).19 Harrold’s understatement of tax is not subject to reduction, it is greater than $5,000 (said sum being greater than 10 percent of the tax required to be shown on the return) and accordingly the addition to tax under section 6661(a) is upheld.
In view of the conclusion we have reached on Harrold’s failure to meet the disclosure requirements of section 6661(b)(2)(B)(ii), we need not consider respondent’s alternative argument. It is that the understatement of tax will not be reduced even where all relevant facts are disclosed because Harrold’s organization and use of Charter 38116 was a “plan or arrangement” of which the “principal purpose” was “the avoidance or evasion of Federal income tax” and thus fell within the definition of a “tax shelter” within the meaning of section 6661(b)(2)(C).20 Under these circumstances disclosure does not serve to reduce the understatement.
6. Award of Damages
We next consider respondent’s request for an award of damages under section 6673. That section provides that this Court shall award damages to the United States not in excess of $5,000 where it appears to the Court that the proceedings before it have been instituted or maintained primarily for delay or that the taxpayer’s position in such proceedings is frivolous or groundless.
Petitioners in these cases were represented by competent counsel. They should have been fully aware that petitioners’ cases did not differ in material facts from the plethora of other cases decided adversely to taxpayers in this and other courts involving so-called contributions to the Universal Life Church. Since 1980, this Court alone has considered more than 130 cases involving claimed charitable contributions to ULC Modesto substantially identical in nature to those at bar. The claimed contribution deduction has not been allowed in any of these cases. See, e.g., Svedahl v. Commissioner, 89 T.C. 245 (1987). The Court of Appeals for the Ninth Circuit, to which an appeal would lie in this case, has decided at least six such cases: Hall v. Commissioner, 729 F.2d 632 (9th Cir. 1984); Davis v. Commissioner, 81 T.C. 806 (1983), affd. by unpublished opinion 767 F. 2d 931 (9th Cir. 1985); Rager v. Commissioner, 775 F.2d 1081 (9th Cir. 1985); Kalgaard v. Commissioner, 764 F.2d 1322 (9th Cir. 1985); Smith v. Commissioner, 800 F.2d 930 (9th Cir. 1986); Svedahl v. Commissioner, 811 F.2d 1509 (9th Cir. 1987); and in Smith imposed double costs and attorney’s fees. As the Ninth Circuit stated in Rager v. Commissioner, supra, where we imposed damages under almost identical facts (775 F.2d at 1083), “Their transparent plan to frustrate the revenue by means of sham charitable deductions justified sanctions, and the appeal justifies further sanctions in this court.” Petitioners here staked their cases upon the testimony of an expert on business associations that the paper trail indicated that the charters were an integral part of the ULC Modesto. However, petitioners and their representatives should have known, and we consider that they did know, that in a case like this one this Court will disregard the form of the transaction and apply the tax laws to its substance. Gregory v. Helvering, 293 U.S. 465 (1935). This rule applies regardless of whether the entity has a separate existence under State law. See Zmuda v. Commissioner, 79 T.C. 714, 720 (1982), affd. 731 F.2d 1417 (9th Cir. 1984). We hold that petitioners’ positions in these cases were frivolous and groundless.21 See Smith v. Commissioner, 800 F.2d 930, 936 (9th Cir. 1986), and accordingly, we award damages in the amount of $5,000 to the United States in docket No. 22943-83 and $5,000 in docket No. 9585-84.
Decisions will be entered for the respondent.
Reviewed by the Court.
Sterrett, Chabot, Nims, Parker, Whitaker, Korner, Shields, Hamblen, Cohen, Clapp, Swift, Wright, Parr, Williams, and Wells, JJ., agree with this opinion. JACOBS, J., concurs in the result. Gerber, J., did not participate in the consideration of this case.