Michael Morrissey - Page 17

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            date of transfer (October 19, 1990) made the transaction                  
            self-correcting * * *.  See Zabolotny v. Commissioner, 7 F.3d             
            774 (8th Cir. 1993)", affg. in part and revg. in part 97 T.C.             
            385 (1991).  Respondent argues that petitioner never corrected            
            the transfer, and, to the extent that the Court of Appeals for            
            the Eighth Circuit held in Zabolotny that a transaction could             
            self-correct, this holding is wrong and should not be followed.           
            Respondent asserts that we should follow our opinion in                   
            Zabolotny to the effect that a "correction" requires an                   
            affirmative act that undoes the transfer.                                 
                 Contrary to the parties' assertion, we do not believe that           
            our decision here is controlled by either opinion in Zabolotny.           
            The facts of that case are significantly different than the               
            facts at hand.5  In Zabolotny v. Commissioner, 97 T.C. 385                
            (1991), the taxpayers, after discovering oil on their farmland,           
            leased the mineral rights in the land.  During the following              
            4-year period, the lease generated annual royalty income of               
            approximately $1 million to $1.5 million.  On May 20, 1981,               
            approximately 4 years after the start of the lease, the                   
            taxpayers sold their interest in the land, including the lease,           


               5 In fact, the Court of Appeals for the Eighth Circuit                 
          explicitly recognized the uniqueness of the facts in Zabolotny,             
          stating:  "The Zabolotnys have presented a highly unusual set of            
          circumstances, which are unlikely to appear in combination in a             
          single case".  Zabolotny v. Commissioner, 7 F.3d at 774, 778 (8th           
          Cir. 1993), affg. in part and revg. in part 97 T.C. 385 (1991).             




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