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support of his position, respondent contends that petitioner did
not give his sons partnership interests but rather gave them
either: (1) Indirect gifts of real estate, accomplished by means
of a transfer to the partnership, or alternatively (2) direct
gifts of real estate, accomplished before the partnership ever
came into existence.
C. Characterization of the Transfers
The parties agree that the partnership came into existence
on August 2, 1991, when John and William executed the partnership
agreement, rather than on the previous day, when only petitioner
had executed it. The parties disagree, however, about the effect
of petitioner’s executing deeds on August 1, 1991, purporting to
transfer the leased land to the then-nonexistent partnership.
Respondent argues that on August 1, 1991, petitioner effectively
gave an undivided 50-percent interest in the leased land to his
sons, either directly or indirectly. Petitioner argues that the
gift was not completed until August 2, 1991. We look to
applicable State law, in this case Alabama law, to determine what
property rights are conveyed. See United States v. National Bank
of Commerce, 472 U.S. 719, 722 (1985) (“‘in the application of a
federal revenue act, state law controls in determining the nature
of the legal interest which the taxpayer had in the property’”
(quoting Aquilino v. United States, 363 U.S. 509, 513 (1960));
LeFrak v. Commissioner, supra.
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