J. Ramsay Farah and Elizabeth Farah - Page 22

          advance two theories to support their argument that they owned              
          the property.  First, petitioners argue that the partnership was            
          never fully implemented and therefore should be disregarded.10              
          Petitioners argue alternatively that the partnership distributed            
          the South Point Road lot to petitioners in 1992.  As we determine           
          that petitioners failed to meet their burden of proving that they           
          owned the property, we need not address whether petitioners have            
          met the other requirements of section 121.  See also sec. 1.121-            
          1(b)(3)(i), Income Tax Regs.                                                
               All relevant documentary evidence shows that when the South            
          Point Road lot was sold in 2001, the seller was the Family                  
          Partnership.  Petitioners essentially ask us to apply the                   
          substance over form doctrine.  They argue that we should                    
          disregard the form of the transaction (sale by the partnership)             
          and look instead to the purported substance of the transaction              
          (sale by petitioners).                                                      

               10Petitioners do not argue that the Family Partnership                 
          should be “disregarded” as the term is used in sec. 301.7701-               
          3(a), Proced. & Admin. Regs., which provides that a noncorporate            
          entity with a single owner can elect to be disregarded as an                
          entity separate from its owner.  Rather, petitioners argue that             
          the Family Partnership was an alternative means for petitioners             
          to hold the property in joint tenancy, and therefore, we should             
          look past the partnership to its purported substance.                       
               If a residence is owned by a single-owner entity that is               
          disregarded for Federal tax purposes under sec. 301.7701-3(a),              
          Proced. & Admin. Regs., the owner is treated as owning the                  
          residence for purposes of the sec. 121 ownership requirement.               
          Sec. 1.121-1(c)(3)(ii), Income Tax Regs.  As the Family                     
          Partnership has multiple owners, it may not be disregarded under            
          sec. 301.7701-3(a), Proced. & Admin. Regs.                                  

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