S. Victoria Wells - Page 6

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               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                
               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          (West Supp. 1994), which was repealed and is now codified in Cal.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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