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affg. in part and revg. in part T.C. Memo. 1981-361; Dettmers v.
Commissioner, 430 F.2d 1019, 1023 (6th Cir. 1970), affg. Estate
of Johnston v. Commissioner, 51 T.C. 290 (1968); Baird v.
Commissioner, 68 T.C. 115, 124 (1977). This test reaffirms the
longstanding principle, evidenced by the following early
statement, that transfer of legal title is not a prerequisite for
a completed sale: “A closed transaction for tax purposes results
from a contract of sale which is absolute and unconditional on
the part of the seller to deliver to the buyer a deed upon
payment of the consideration and by which the purchaser secures
immediate possession and exercises all the rights of ownership.”
Commissioner v. Union Pac. R.R. Co., 86 F.2d 637, 639 (2d Cir.
1936), affg. 32 B.T.A. 383 (1935).
In determining whether passage either of title or of
benefits and burdens has occurred, we look to State law. It is
State law that creates, and governs the nature of, interests in
property, with Federal law then controlling the manner in which
such interests are taxed. See United States v. National Bank of
Commerce, 472 U.S. 713, 722 (1985). Here, execution of the
contracts for deed was not accompanied by a transfer of legal
title, so we must decide whether these instruments were
sufficient under State law to confer upon the purchaser the
benefits and burdens of ownership. This inquiry is a practical
one to be resolved by examining all of the surrounding facts and
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