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OPINION
Respondent determined that the recording of the deed from
Mr. Wells to petitioner caused her to be the sole owner of the
property. As a result, respondent determined that petitioner
should have reported the entire net realizable gain on the sale
of the Paddock Lane property. Petitioner contends that the deed
was invalid and of no effect because there was no specific intent
to transmute the Paddock Lane property to separate property. As
a consequence, petitioner argues, even though formal title vested
in her, the Paddock Lane property was still community property.4
Thus, petitioner claims that she is not liable for the total
amount of gain on the sale of the property. Petitioner bears the
burden of proving that respondent's determination is erroneous.
Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933).
Generally, sections 61 and 1001 require a taxpayer to
recognize income in the year the gain is realized. The owner is
the person responsible for reporting the gain on the sale of
property.
State law controls the nature of the legal interest of the
taxpayer. Once ownership is decided under State law, Federal law
4 Under California law, joint tenancy property acquired
during the marriage is presumed to be a community property asset,
for purposes of division of such property in a marriage
dissolution proceeding. Former Cal. Civ. Code sec. 4800.1(b)
(West Supp. 1994), which was repealed and is now codified in Cal.
Fam. Code sec. 2581 (West 1994).
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Last modified: May 25, 2011