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only an equitable interest. See Hill v. Hill, 185 Kan. 389, 345
P.2d 1015, 1023 (1959).
The flaw in that argument is the contention that the
Separation Agreement was executed on October 9, 1987. On that
date, petitioner and Elaine merely announced that they had
reached a potential compromise; they did not file anything with
the court. In fact, petitioner and Elaine initialed the
Separation Agreement in the sections describing the equitable
interest as late as July 22, 1988, and September 2, 1988. The
exchange actually occurred thereafter, on September 7, 1988.
Finally, the Separation Agreement was not filed until September
28, 1988, a fact to which the Government has stipulated. At the
time immediately prior to the exchange, Elaine still held an
ownership interest.
The Government makes an extended argument based upon Kansas
law and differences between warranty deeds and quitclaim deeds.
Of course, Kansas law is controlling as to the technicalities of
title relating to the property. But such niceties in local law
(cf. Helvering v. Hallock, 309 U.S. 106, 114 (1940)) do not
detract from the substance of the transaction as we view this
record.
We hold that petitioner did not realize any $800,000 capital
gain with respect to the transaction before us. Since there is
no deficiency with respect to this $800,000, petitioner is not
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