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In advancing her argument, petitioner assumes that she can
disavow the form of the transactions that occurred with respect
to the Happy Valley property. Based on this assumption,
petitioner asserts that the following substance should control
the tax consequences of the transactions involving the Happy
Valley property: The quitclaim deed of September 26, 1997,
constituted a written request from Mr. Walker to petitioner that
she sell his 25-percent interest in the Happy Valley property to
a disinterested third party; therefore, petitioner’s sale of the
Happy Valley property to Parker Development took place on behalf
of Mr. Walker. Petitioner contends that this substance falls
within the scope of the second situation described in section
1.1041-1T(c), Q&A-9, Temporary Income Tax Regs., 49 Fed. Reg.
34453 (Aug. 31, 1984). Accordingly, petitioner concludes that
she should be provided nonrecognition-of-gain treatment under
section 1041(a) as to the 25-percent interest in the Happy Valley
property that she sold on behalf of Mr. Walker. As a backstop to
her substance over form argument, petitioner contends that she
filed her 1997 and 1998 returns in accordance with an agreement
that she had with Mr. Walker that he would report one-half of the
gain resulting from the sale of petitioner’s undivided 50-percent
interest in the Happy Valley property.
Conversely, respondent argues that petitioner failed to
report a gain on the sale of property that she acquired in a
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