                        T.C. Memo. 2005-247



                      UNITED STATES TAX COURT



   ESTATE OF MARIE A. MANIGLIA, DECEASED, JOSEPH S. MANIGLIA,
                     EXECUTOR, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 20141-03.             Filed October 26, 2005.


     Paul J. Dee, Jr., and Jueun Chung, for petitioner.

     Michael R. Fiore, for respondent.



                        MEMORANDUM OPINION


     WELLS, Judge:   Respondent determined a $764,472 deficiency

in the estate tax of the Estate of Marie A. Maniglia (the

decedent).   The issue we must decide is whether the entire value

of certain real property or only 50 percent of the value of that

property is properly includable in the decedent’s gross estate.

All section references are to the Internal Revenue Code, as
                                - 2 -

amended, and all Rule references are to the Tax Court Rules of

Practice and Procedure.

                             Background

     Some of the facts and certain exhibits have been stipulated.

The parties’ stipulations of fact are incorporated in this

opinion by reference and are found as facts in the instant case.

At the time of filing the petition in the instant case, Joseph S.

Maniglia1 resided in Wareham, Massachusetts.   The decedent died

on July 11, 1999.   At the time of her death, the decedent resided

in Somerville, Massachusetts.   The decedent was a widow whose

husband, Angelo Maniglia, died in 1971.   The decedent had two

sons, Frank A. Maniglia and Joseph S. Maniglia.   Frank A.

Maniglia was involved in a small plane crash in 1985, and his

body was never recovered.   The decedent was survived only by

Joseph S. Maniglia, who is the executor of her estate.

     The real estate at 7 Commonwealth Avenue, Boston,

Massachusetts, was a multi-unit, residential, rental apartment

building (the property).    On May 25, 1977, Henry Fluster conveyed

the property to the decedent and Frank A. Maniglia as joint

tenants for $200,000.   The deed was properly recorded in the

Suffolk County, Massachusetts, Registry of Deeds (the registry).



     1
       The caption on the petition incorrectly stated the
executor’s name to be “Joseph A. Maniglia”. The caption has been
amended, by order, to correctly state the executor’s name as
“Joseph S. Maniglia”.
                               - 3 -

The property was paid for as follows:   (1) A loan of $100,000

from the Winter Hill Federal Savings & Loan Association to the

decedent, secured by a mortgage on the property which was

recorded in the registry on March 25, 1977; (2) a loan of $75,000

from Henry Fluster to the decedent, secured by a mortgage on the

property which was recorded in the registry on March 25, 1977;2

and (3) $25,000 in cash.

     On June 10, 1977, Frank A. Maniglia conveyed his undivided

one-half interest in the property to the decedent for a nominal

consideration.   The conveyance was recorded in the registry.    On

August 1, 1977, the decedent executed an indenture of trust

creating the “Fam-Trust” (Fam-Trust)3 as a nominee trust4 under



     2
       We note that the mortgages were recorded in March, 2
months before the conveyance of the property from Henry Fluster
to the decedent and Frank A. Manigilia. However, these facts
were stipulated by the parties, and the record does not contain
any documents indicating another recording date.
     3
       We note that the documents are not consistent in the
spelling of “Fam-Trust”. The above-mentioned indenture of trust
referred to the “Fam-Trust”. Other documents vary slightly. For
example, the trust has been referred to as the “Fam Trust” or
“FAM Trust”. Unless referring to a specific spelling on a
document, we will use “Fam-Trust”.
     4
       A nominee trust is an entity created for the purpose of
holding legal title to property. See, e.g., Johnston v. Holiday
Inns, Inc., 595 F.2d 890, 893 (1st Cir. 1979) (“A nominee trust
is an entity created for holding legal title to property with the
trustees having only perfunctory duties; upon termination of the
trust, the beneficiaries accede to title as ‘tenants in common in
proportion to their beneficial interests.’”(quoting Birnham &
Monahan, “The Nominee Trust in Massachusetts Real Estate
Practice”, 60 Mass L.Q. 364 (Winter 1976))).
                                - 4 -

Massachusetts law and naming the decedent as the settlor and sole

beneficiary and Joseph S. Maniglia as trustee.   The indenture of

trust was recorded in the registry on August 5, 1977, and has

never been amended.   Additionally, an unrecorded statement of

beneficial interest designated the decedent as the sole

beneficiary of the Fam-Trust.

     Also on August 1, 1977, the decedent conveyed the property

to “Frank S. Maniglia” as trustee of the Fam-Trust for a nominal

consideration and recorded the deed in the registry.   On

September 14, 1977, the decedent recorded a confirmatory deed in

the registry which stated that, because of a typographical error,

the previously recorded deed had mistakenly referred to Frank S.

Maniglia as trustee when, in fact, Joseph S. Maniglia was the

trustee.

     Joseph S. Maniglia managed the property, except for a period

in the early 1980s when he was unable to perform his management

responsibilities.   The bank account into which rents were

deposited and from which expenses were paid was at all times in

the name of “Fam-Trust”.

     On June 8, 1978, Joseph S. Maniglia signed a building permit

with the City of Boston which named “FAM Trust” as the owner of

the property.   All documentation relating to the building permit

indicated that “FAM Trust”, or Joseph S. Maniglia, trustee of the

Fam-Trust, was the owner of the property.
                                 - 5 -

     On December 23, 1985, the decedent refinanced the property

with a $350,000 loan from the Winter Hill Federal Savings & Loan

Association.   The mortgage on the property securing the loan was

recorded in the registry.    Immediately before recording the

mortgage, Joseph S. Maniglia, as trustee of the Fam-Trust,

conveyed the property to the decedent.     Immediately after

recording the mortgage, the decedent reconveyed the property to

Joseph S. Maniglia as trustee of the Fam-Trust.     Both conveyances

were recorded in the registry.

     Mortgage interest on the refinanced loan was reported to the

decedent.   The City of Boston issued real estate tax bills for

the property to “MANIGLIA JOSEPH S TRST OF FAM TR.”     The property

was insured in the name of “FAM Trust, Joe Maniglia Tr.”

     From 1978 through 1999, Federal partnership returns were

filed in the name of “Family Trust”.     From 1996 through 1999,

Massachusetts State partnership returns were filed in the name of

“Family Trust”.    For taxable years 1996 through 1999, the

partnership filed Schedules K-1, Partner’s Share of Income,

Deductions, Credits, etc., indicating that the decedent and

Joseph S. Maniglia each owned a 50-percent interest in the

partnership and reporting 50 percent of the partnership’s income

to each partner.    For taxable years 1996 through 1999, the

decedent and Joseph S. Maniglia each reported the income reported

on the Schedules K-1 on their individual Federal income tax
                               - 6 -

returns.   No written partnership agreement exists, and no formal

records of the partners’ capital accounts or formal financial

statements exist.

     A Form 706, United States Estate (and Generation-Skipping

Transfer) Tax Return, was filed for the decedent’s estate on

October 13, 2000.   Schedule F, Other Miscellaneous Property Not

Reportable Under Any Other Schedule, of the estate tax return

indicated that the decedent owned only a 50-percent interest in

the “Fam Trust”, a partnership owned equally by the decedent and

Joseph S. Maniglia, and reported only 50 percent of the

property’s date of death value (as determined by the estate).5

                            Discussion

     Respondent contends that the property was owned by the Fam-

Trust, of which the decedent was the sole beneficiary, and

therefore the entire value of the property is includable in the

decedent’s gross estate.   The estate argues that the property was

owned by a partnership, and therefore only 50 percent of the

value of the property is includable in the decedent’s gross

estate.


     5
       Schedule F of the decedent’s estate tax return states:
“The decedent owns a 50% interest in the FAM Trust, a
partnership, EIN XX-XXXXXXX. The only asset held by the
partnership is real estate located at 7 Commonwealth Ave.,
Boston, MA. The date of death value of the real estate is
$1,184,790.” Only 50 percent ($592,395) of the value of the
property was reported as includable in the decedent’s gross
estate on Schedule F. The parties have stipulated that the date
of death value is $2,400,000.
                                - 7 -

Section 2033 provides:   “The value of the gross estate shall

include the value of all property to the extent of the interest

therein of the decedent at the time of his death.”    See also sec.

20.2033-1(a), Estate Tax Regs. (“The gross estate of a decedent

* * * includes under section 2033 the value of all property,

whether real or personal, * * * beneficially owned by the

decedent at the time of his death.”).    As a general rule, the

Commissioner’s determinations in the notice of deficiency are

presumed correct, and the burden of proving an error is on the

taxpayer.    Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115

(1933).6

     The estate argues that substance should prevail over form;

contending that bare legal title does not establish ownership and

that the Court must examine the intent of the parties as well as

their conduct to decide that a partnership owned the property.

In some circumstances, a taxpayer may rely on substance over

form.    Helvering v. F.& R. Lazarus & Co., 308 U.S. 252 (1939).

The taxpayer, however, “must provide objective evidence that the

substance of the transaction was in accord with the position

argued by * * * [the taxpayer] rather than the form set forth by

all the relevant documents.”    Groetzinger v. Commissioner, 87

T.C. 533, 541 (1986) (emphasis added).    The Court will not



     6
       The estate does not argue that the burden of proof should
be on respondent pursuant to sec. 7491(a).
                                 - 8 -

restructure the transaction with the benefit of hindsight in

applying the substance over form doctrine.     Id. at 542; see also

Commissioner v. Natl. Alfalfa Dehydrating & Milling Co., 417 U.S.

134, 149 (1974) (“while a taxpayer is free to organize his

affairs as he chooses, nevertheless, once having done so, he must

accept the tax consequences of his choice, whether contemplated

or not, * * * and may not enjoy the benefit of some other route

he might have chosen to follow but did not”); Estate of

Rosenblatt v. Commissioner, T.C. Memo. 1977-12 (“We cannot treat

lightly the formal manner in which properties are held, lest we

subject legal titles to unnecessary uncertainties and complicate

the administration of law.”).

     The estate has not produced sufficient credible evidence to

show that the ownership of the property is different from the

form set forth in all the relevant documents and, therefore, has

not proved that the substance of the transaction was different

from its form.     The evidence offered on the estate’s behalf is

Joseph S. Maniglia’s testimony and that of his spouse and his

accountant.   At trial, Joseph S. Maniglia stated that “Every real

estate broker on Charles Street in Boston knew I was one of the

owners of that building.”    We agree that, as the trustee of the

Fam-Trust, Joseph S. Maniglia would be the legal holder of title

to the property.    However, the estate does not appear to

appreciate the fact that as trustee, Joseph S. Maniglia would
                                 - 9 -

hold title to the property for its beneficial owner under the

Fam-Trust; i.e., the decedent.

     At trial, the estate offered Joseph S. Maniglia’s

accountant, Mr. Pino, as a witness.      Mr. Pino’s testimony was of

little help because of his poor memory.     He could not remember:

The year he became licensed as a Certified Public Accountant, the

year he met the Maniglias and began preparing their returns, or

whether he ever knew that Joseph S. Maniglia was or was not a

coowner of the property.7    Additionally, Mr. Pino’s admission

that his license was suspended “back then” because of a tax

evasion conviction brings his credibility into question.

     Neither the filing of partnership returns in the name of

“Family Trust” for taxable years 1978 through 1999 nor the fact

that Joseph S. Maniglia performed managerial tasks with respect

to the property is sufficient proof that a partnership owned an

interest in the property.     There is no written partnership

agreement.   There are no balance sheets showing the partnership

assets or formal financial statements indicating the property was

owned by a partnership.     To the contrary, the trust document,




     7
       Mr. Pino stated on direct examination that he never
received any documents from the Maniglias indicating there was no
partnership. He also, however, never received any documents
showing that Joseph S. Maniglia jointly owned the property or
that a partnership owned the property. The only information Mr.
Pino ever received in the process of preparing the Maniglias’ tax
returns related to income and expenses.
                              - 10 -

deeds, and other documents admitted into evidence8 indicate that

the Fam-Trust owned the property, that the decedent was the sole

beneficiary of the Fam-Trust, and that Joseph S. Maniglia was the

trustee of the Fam-Trust.

     The estate contends that Joseph S. Maniglia obtained a 50

percent pro rata share of the proceeds when the property was

refinanced and that he contributed the $25,000 in cash towards

the purchase of the property.9   However, the estate has failed to

offer any documentary evidence corroborating its contentions.

The only evidence the estate offered to counter the documentary

evidence showing the decedent was the sole beneficial owner of

the property was the self-serving testimony of Joseph S. Maniglia

and the vague testimony of his wife.10   Joseph S. Maniglia


     8
       We note that the record contains partnership returns that
were filed in the name of “Family Trust”. Schedule L, Balance
Sheets, of the Form 1065, U.S. Partnership Return of Income, did
not list the property as a partnership asset. In fact, no
partnership assets were listed on any of the Schedules L admitted
into evidence. The partnership claimed on Schedule B that it was
not required to complete Schedule L because: The partnership’s
total receipts for that year were less than $250,000; the
partnership’s total assets at the end of the year were less than
$600,000; and Schedules K-1 were filed with the return and
furnished to the partners on or before the due date for the
partnership return.
     9
       At trial, Joseph S. Maniglia conceded that there is no
documentation proving that he contributed $25,000 in cash.
     10
       Joseph S. Maniglia’s wife, Linda Maniglia, testified
that, after graduating from college, she and Joseph S. Maniglia
both worked as teachers, lived in an inexpensive apartment, and
maintained a modest lifestyle in order to save money. Mrs.
                                                   (continued...)
                             - 11 -

testified that he was the “record” owner of the property on the

date of purchase but did not realize until “1990-whatever” that

his name was not on the title to the property.   Joseph S.

Maniglia, however, signed the trust document stating that he

would “hold any and all property that may be transferred to him

as trustee hereunder for the sole benefit of the following

person, who is the sole Beneficiary hereof: Marie A. Maniglia.”11

Moreover, in connection with the 1985 refinancing, Joseph S.

Maniglia, as trustee, conveyed the property to the decedent, and

she reconveyed the property to Joseph S. Maniglia as trustee.


     10
      (...continued)
Maniglia testified that, in addition to their joint checking
account, Joseph S. Maniglia also maintained a separate account
where he deposited his earnings from “coaching and different
things.” Mrs. Maniglia, testified that it was her understanding
that Joseph S. Maniglia and her mother-in-law, the decedent,
purchased the property with Joseph S. Maniglia providing the
$25,000 downpayment from his separate account. Mrs. Maniglia
also testified, however, that she had no knowledge of how much
money was in Joseph S. Maniglia’s separate account and that she
never read any of his bank statements. Mrs. Maniglia further
testified that Joseph S. Maniglia and the decedent equally split
the proceeds from the 1985 refinancing, but that she was not sure
where Joseph S. Maniglia placed the proceeds from the
transaction. She personally did not have access to the funds,
but stated that if she wanted money, she “just got it from Joe
[Joseph S. Maniglia].”
     11
       At trial, respondent offered evidence of two mortgages
secured by other properties in Joseph S. Maniglia’s name dated
Feb. 27, 1977, in the amount of $22,000, and Jan. 25, 1980, in
the amount of $90,000. Joseph S. Maniglia’s name was on the
mortgage documents relating to both other properties, but not on
the mortgage on the property. These mortgages on other
properties tend to show that Joseph S. Maniglia should have
understood the import of the documents he signed regarding the
property.
                              - 12 -

   We are “not compelled to believe evidence which to it seems

improbable, or to accept as true uncorroborated evidence of

interested witnesses even though uncontradicted.”     Marcella v.

Commissioner, 222 F.2d 878, 883 (8th Cir. 1955), affg. a

Memorandum Opinion of this Court.   We hold that the property was

not owned by a partnership between the decedent and Joseph S.

Maniglia and that the Fam-Trust, Joseph S. Maniglia as trustee

and the decedent as sole beneficiary, owned the property at the

decedent’s death.   Accordingly, respondent properly included the

entire value of the property in the decedent’s gross estate.

     To reflect the foregoing,


                                         Decision will be entered

                                    for respondent.
