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right, subject to its performance under the contract, to specific
performance of the contract for deed.
Concentrating on the substance of the transaction, we
conclude that the bundle of rights that the Church received is
essentially the same bundle of rights7 that would have been
received had the Church obtained legal title to the property and
granted a mortgage back to petitioner. On brief, respondent does
not dispute that the latter transaction is a completed gift. The
Supreme Court of Texas describes the substance of a contract for
deed as effecting “a change of ownership wherein the purchaser
becomes [the] equitable owner of the property while all that
remains in the seller is bare legal title, more in the nature of
security to guarantee payment than anything else.” Criswell v.
European Crossroads Shopping Center, Ltd., 792 S.W.2d at 949.
For Federal income tax purposes we find no reason to treat the
transactions differently.
7We recognize there are technical differences in the
remedies available to the vendor on default by the purchaser;
however, we are not convinced they are significant for Federal
taxation purposes in this case.
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Last modified: May 25, 2011