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the petition herein, explained the Commissioner's determination
as follows1:
It is determined that you are responsible for fifty
(50) percent of the gain on the sale of your personal
residence. The residence was sold to a 3rd party as
part of the property settlement. When it was sold you
and your ex-wife held the property as tenants in the
entirety. Therefore, you are responsible for fifty
(50) percent of the gain and your taxable income is
increased by $82,915.00.
Section 61(a)(3)2 includes in gross income "Gains derived
from dealings in property". State law determines the property
ownership interest of a taxpayer; Federal law controls the tax
consequences. Aquilino v. United States, 363 U.S. 509, 512-513
(1960). Since the property in question, petitioner's principal
residence, was located in Michigan, Michigan law is controlling
as to ownership of the property. In accordance with Michigan
law, the marital home was held by husband and wife as tenants by
the entirety. Hoyt v. Winstanley, 191 N.W. 213 (Mich. 1922).
Moreover, under Michigan law:
Every husband and wife owning real estate as joint
tenants or as tenants by the entireties shall, upon
being divorced, become tenants in common of such real
estate, unless the ownership thereof is otherwise
1 A copy of the deficiency notice incorporated in the
stipulation of facts contained only a truncated portion of the
explanation above, cutting out several inches of the left hand
margin, apparently the result of careless photocopying.
2 Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the year in issue, and
all Rule references are to the Tax Court Rules of Practice and
Procedure.
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