-5-
petitioner could receive a stepped-up basis for only 50 percent
of the date of death value of the CPW shares. Accordingly,
respondent determined that petitioner had a basis in the CPW
shares of $428,340, composed of the following amounts: One-half
of the original cost basis ($22,000), one-half of the date of
death value ($350,000), $43,200 of commissions, and $13,140 of
transfer taxes.3 From the $720,000 selling price, respondent
subtracted the $428,340 basis and allowed the section 121 one-
time exclusion of $125,000 of gain from the sale of a principal
residence to determine a gain on sale of $166,660.
Discussion
Petitioner argues that because the joint tenancy was created
prior to January 1, 1977, and because she provided no part of the
consideration for the purchase, the contribution rule of section
2040(a) is applicable and, consequently, under section 1014, she
is entitled to a stepped-up basis in 100 percent of the property.
Respondent argues that because petitioner's husband died after
1981, as a matter of law the 50-percent inclusion rule of section
2040(b)(1) is applicable and that petitioner is entitled to a
stepped-up basis under section 1014 in only 50 percent of the
property. Alternatively, respondent argues that if the
contribution rule of section 2040(a) is applicable, petitioner
3Respondent did not include the $572 of transfer fees and
$1,500 for asbestos removal in petitioner's basis.
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