Michael Graham - Page 7

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               On November 10, 1992, petitioner sold the residence to the             
          Foundation.  The Foundation gave petitioner $250,000, and                   
          petitioner and his wife continued to live in the residence, rent-           
          free for 3 years.  On June 3, 1993, the Foundation transferred an           
          additional $135,000 to petitioner.  Respondent’s expert testified           
          that on November 10, 1992, the present value of 3 years of rent             
          was $111,371,2 and the present value of the additional $135,000             
          payment was $131,905.  Thus, according to the uncontradicted                
          testimony of respondent’s expert, on November 10, 1992, the fair            
          market value of the residence was $535,000 and the present value            
          of the $250,000 payment, the $135,000 payment, and the rent-free            
          occupation of the residence was $493,276.                                   
               Petitioner may be a substantial contributor only if the                
          transfer to the Foundation exceeds $47,432, which is 2 percent of           
          the total contributions received by the Foundation at or before             
          the end of 1992 (i.e., $2,371,589).  Sec. 507(d)(2)(A).                     
          Petitioner’s net transfer of $41,724 (i.e., the difference                  
          between the $535,000 fair market value of the residence and the             
          $493,276 consideration received from the Foundation) was                    
          insufficient to make him a substantial contributor to the                   
          Foundation.  At trial, respondent conceded that petitioner would            
          not be a substantial contributor if the Court found that the                

               2  The present value was adjusted to take into account the             
          value of the tenants’ payment of property taxes and insurance.              

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