                        T.C. Memo. 1998-344



                      UNITED STATES TAX COURT



              ESTATE OF MAX L. VAN TINE, DECEASED,
              ANN VAN TINE, EXECUTOR, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 20054-96.               Filed September 28, 1998.



     Howard L. Sanger and Christopher S. Manes, for petitioner.

     Christine V. Olsen and Gordon L. Gidlund, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     COLVIN, Judge:   Respondent determined a deficiency in

petitioner's estate tax of $126,885.

     Decedent conveyed joint tenancies in three parcels of real

property to his daughter several years before he died.   The sole

issue for decision is whether decedent's daughter contributed
                                - 2 -

consideration equal to at least one-half of the total

consideration that decedent and his spouse paid for the three

parcels of real property.    If so, one-half of the value of the

three properties is excluded from decedent's estate under section

2040.   Ann Van Tine performed valuable services for her father's

construction business from 1955 to the 1970's, but the record

does not show how much consideration decedent and his wife paid

to buy and improve the three parcels.    As a result, we have no

basis to decide what part of the parcels' value that is

attributable to Ann Van Tine's services.     Thus, on this record,

we hold for respondent.

     Section references are to the Internal Revenue Code.     Rule

references are to the Tax Court Rules of Practice and Procedure.

                          FINDINGS OF FACT

     Some of the facts have been stipulated and are so found.

A.   The Van Tines

     Ann Van Tine was born around 1937.      She was the only child

of decedent and Betty Van Tine.    Ann Van Tine lived at home with

her parents until 1980 when she was about 43.     Her parents owned

and operated Van Tine Construction (VTC), which built homes and

commercial buildings.    They paid for all of her basic personal

needs, such as food and clothing.    They bought and insured her

vehicle.    Ann Van Tine never attended college, married, or had

children.    Her hobbies were growing bonsai trees and keeping

German Shepherd dogs.
                                 - 3 -

     At the time of trial, Ann Van Tine had carpal tunnel

syndrome1 in both hands and a disc problem in her back caused by

construction work.

B.   Dr. Patricia Ebaugh

     Patricia Ebaugh (Ebaugh) moved near the Van Tines in 1941

when Ebaugh was 17 and Ann Van Tine was 4.     Ebaugh became a very

close friend of the Van Tine family.     They treated her like part

of their family.     Ebaugh treated Ann Van Tine like a younger

sister.

     Ebaugh was a lab technician in Los Angeles until the mid-

1950's.     She graduated from the University of Southern California

in 1958.     She graduated from medical school in Philadelphia and

was an anesthesiologist in Long Beach, California, from 1964 to

1972.     Ebaugh bought a home a few blocks from the Van Tines' home

(Ebaugh's Rancho Palos Verdes home).

C.   Van Tine Construction

     On July 17, 1959, the Van Tines filed articles of

incorporation for M. L. Van Tine, Inc.     Ann Van Tine was a

director of the corporation.     However, the Van Tines did not

activate the corporation and continued to operate VTC as a

proprietorship.

         Albert Andrade (Andrade) was one of VTC's subcontractors.

He installed driveways at residential homes and parking lots for

     1
       Carpal tunnel syndrome is caused by using one's arms in a
repetitive manner over a long period of time.
                                - 4 -

decedent and VTC for about 12 years from the late 1950's to the

early 1970's.    Andrade sometimes saw Ann Van Tine cleaning houses

being built by VTC.    VTC bought property and developed an office

building in 1973.   VTC developed property in Malibu, Torrance,

Inglewood, Redondo Beach, and San Pedro, California, during the

1970's.

D.   Ann Van Tine's Work for VTC and Other Activities

     1.   Ann Van Tine's Construction-Related Activities

     Beginning when Ann Van Tine was in the 5th grade, decedent

picked her up after school and took her to job sites where they

stayed until dinner.   When she was in high school, Ann Van Tine

helped her father operate transit levels (used to measure the

slope of land), install foundation forms, and do rough plumbing

and rough electrical work.   She did carpentry, framing, roofing,

cement work, painting, and landscaping.   Ann Van Tine received

her driver's license in 1953 when she was 16 years old.    At that

time she began to pick up and deliver materials for VTC.   She was

supervising construction by the 1960's and obtaining materials

for construction jobs.   Her responsibilities to VTC and abilities

grew steadily.

     From the mid-1950's to around 1980, Ann Van Tine helped

manage (e.g., rent, maintain, and landscape) apartments that VTC

had built.

     Decedent and Betty Van Tine occasionally discussed giving

Ann Van Tine an interest in VTC property in exchange for her work
                                 - 5 -

for VTC.    In 1960, decedent and Betty Van Tine told Ann Van Tine

that they wanted to give her a 50-percent joint interest in VTC

property when they retired and that they hoped that she would

continue to work for VTC.

     In 1967, decedent and his partner, Bert E. Moore, Jr.

(Moore) (not otherwise identified in the record), were building

houses on three small tracts.    Moore and decedent each supervised

one site.    Ann Van Tine supervised the completion of the houses

on the third tract.

     Ann Van Tine received no salary for her work for VTC.      She

never applied for a contractor's license, never was bonded, never

signed a contract on behalf of VTC, and did not have regular

hours or duties.    She did not have signature authority on the VTC

checking account.    She was not listed as a beneficiary on any

insurance contract for VTC properties.    She did not do office

work for VTC.    Betty Van Tine managed the VTC office, kept the

books, and answered the phone.

            2.   Ann Van Tine's Real Estate License

     In 1967, Ann Van Tine obtained a real estate agent's

license.    She used it to show VTC properties to prospective

buyers, to help potential buyers of VTC tract homes sell their

present homes, to sell homes that VTC had built, and to help

potential customers find lots for contract homes.     She also sold

property not owned by VTC.
                                - 6 -

     3.   Ann Van Tine's Activities Unrelated to VTC

     During the 1950's and 1960's, Ann Van Tine engaged in

activities unrelated to VTC, including providing landscaping

services unrelated to VTC and selling bonsai trees part time.

She worked for a real estate broker and received commissions for

selling non-VTC properties.    During the 1950's and 1960's, Ann

Van Tine typically earned $1,500 to $4,000 a year from her

activities unrelated to VTC.    In some years she earned no income.

     4.   Ann Van Tine's Work for Patricia Ebaugh

     Ann Van Tine began working for Ebaugh part time as a medical

assistant in 1970.   In 1972, Ebaugh moved to Palm Springs,

California, to begin a family medical practice.    Ann Van Tine

helped Ebaugh negotiate the purchases of a home in Palm Springs

and an office in nearby Cathedral City.    Ebaugh asked Ann Van

Tine to work with a contractor to build partitions for an office,

a waiting room, and examination rooms.    Ann Van Tine negotiated

with the general contractor, decorated the office, advertised for

and located a receptionist and nurse for Ebaugh, managed the

office, and ordered supplies.    Most of Ann Van Tine's work in the

Palm Springs area was during weekends.    Ann Van Tine helped sell

Ebaugh's Rancho Palos Verdes home in 1972.

     Ebaugh transferred her Palm Springs property to herself and

Ann Van Tine as joint tenants on January 12, 1974.    Ebaugh moved

to Palm Desert, California, in 1975.    Ann Van Tine helped Ebaugh
                                - 7 -

buy a home in Palm Desert and sell Ebaugh's Palm Springs home.

On October 30, 1975, Ebaugh transferred her Palm Desert property

to herself and Ann Van Tine as joint tenants.

     In 1977, Ann Van Tine helped Ebaugh move her office from

Cathedral City to Rancho Mirage, which is nearer to Palm Desert.

She met with contractors and ensured that the office was

established and decorated.

     Ann Van Tine moved from the family home at 7 Diamonte Lane

to Big Bear, California, late in 1979 or early in 1980.    In 1989,

Ann Van Tine and decedent began to live with Ebaugh in Palm

Desert, California.

     Ann Van Tine began to work for Ebaugh full time in 1982.

Ebaugh paid her a total of more than $540,000 from 1970 to 1995

(an average of about $22,500 per year).   See par. J, below.

     At the time of trial, Ann Van Tine and Ebaugh lived

together, shared a family trust, and commingled their funds.

Ebaugh paid some of petitioner's attorney's fees in this case.

     5.   Garrabrant House

     In 1980, Ann Van Tine oversaw VTC's construction of a home

for Jean Garrabrant (Garrabrant), Betty Van Tine's sister.     Ann

Van Tine scheduled all of the subcontractors and inspected their

work when they were finished.
                                - 8 -

E.   Betty Van Tine's Death; Decedent's Remarriage, Later Years,
     and Death

     Betty Van Tine died unexpectedly in 1978.     Betty Van Tine's

will was not probated because her property was held in joint

tenancy with decedent.

     Decedent married Omega Van Tine in 1981.     They lived at 7

Diamonte Lane.

     Decedent's health began to decline in the early 1980's.      On

September 20, 1982, Ebaugh wrote:    "[decedent] has been

[complaining of] numerous medical problems recently from GI to

heart to neck pain.    He appears to be upset.   No information

forthcoming from wife.    His daughter is going to take a more

active role in helping * * * business."

     On February 25, 1986, decedent complained to Ebaugh that he

was having trouble accomplishing everyday tasks.     On January 25,

1988, he complained that he had trouble remembering anything.

     Ebaugh wrote:    "However, in 1988 the effects of the disease

were limited primarily to recent memory loss.     He knew his

daughter, his friends, and was completely capable of conducting

the activities of daily living."

F.   Decedent's Income Tax Returns

     On his income tax returns for 1979 and 1980 and 1989 to

1992, decedent reported receiving no income from contracting.2


     2
         The record does not show whether decedent reported income
                                                     (continued...)
                                 - 9 -

On the 1980 return, he deducted payments to someone other than

Ann Van Tine for repairs, painting, and gardening at the 2255

Sepulveda Boulevard property, discussed below at paragraph G-2.

G.   The Joint Tenancy Properties

     1.      The 7 Diamonte Lane Property

     In 1963, decedent and Betty Van Tine bought land at 7

Diamonte Lane in Rancho Palos Verdes, California, which they kept

in their names.     In October 1963, decedent and his wife used this

property as collateral for a $47,500 loan.      They used the loan to

build homes at 7 Diamonte Lane and on the adjacent lot.

     The Van Tine home at 7 Diamonte Lane had about 2,500-square

feet, three bathrooms, and a three-car garage.      The home had a

panoramic view of the Pacific Ocean.

     Ann Van Tine lived at 7 Diamonte Lane until she moved to Big

Bear, California, around 1979 or 1980.      Decedent lived at 7

Diamonte Lane until he moved to Palm Desert, California, around

1989.     Ann Van Tine continued to have important mail sent to 7

Diamonte Lane because the U.S. Postal Service did not deliver

mail to her Big Bear cabin.     On December 27, 1988, decedent

signed a deed which gave Ann Van Tine a joint tenancy in the

property at 7 Diamonte Lane.     The deed creating Ann Van Tine's

interest in the 7 Diamonte Lane property was recorded on February

22, 1989.


     2
      (...continued)
from contracting for 1981 to 1988.
                                - 10 -

     Through a realtor, decedent leased the 7 Diamonte Lane

property to tenants beginning in May 1988, and received all of

the rents while he was alive.    He died on May 9, 1993.   It was

leased until Ann Van Tine sold it in 1995.

     2.   2255 Sepulveda Boulevard

     In 1963, Daryl and Beverly Stark, George and Lucy Carrick,

and decedent and Betty Van Tine bought property at 2255 Sepulveda

Boulevard.   In 1964, the Carricks, Starks, and Van Tines built an

office building at 2255 Sepulveda Boulevard.    In 1967, decedent

and Betty Van Tine bought the Starks' and Carricks' interest in

the property at 2255 Sepulveda Boulevard.

     Decedent and Betty Van Tine borrowed $19,170 when they

refinanced the 2255 Sepulveda Boulevard property in 1976.     The

2255 Sepulveda Boulevard property was leased to commercial

tenants by decedent and Betty Van Tine in 1978, and by decedent

in 1979, 1980, 1988, and 1990-93.

     Decedent gave Ann Van Tine a joint tenancy in the property

at 2255 Sepulveda Boulevard on May 28, 1982.    It was recorded on

February 1, 1989.

     3.   2243-45 Sepulveda Boulevard

     In 1973, decedent and Moore bought property at 2243-45

Sepulveda Boulevard.   Decedent and Moore used the property at

2255 Sepulveda Boulevard as collateral when they bought the

property at 2243-45 Sepulveda Boulevard.    Moore conveyed the

property at 2243-45 Sepulveda Boulevard to decedent in 1980.
                               - 11 -

     Decedent leased office space at 2243-45 Sepulveda Boulevard

to commercial tenants until 1994 when the property was sold.

There was no landscaping on the 2243-45 Sepulveda property.

     Decedent executed a deed granting a joint tenancy in the

property at 2243-45 Sepulveda Boulevard to Ann Van Tine on May

28, 1982.   It was recorded on February 1, 1989.    Thereafter, he

continued to receive all the rent on the 2243-45 Sepulveda

Boulevard property.

     4.     The Joint Tenancy Deeds

     H. Louise Van Valkenberg (Van Valkenberg), Ebaugh's and

decedent's accountant, usually went to Ebaugh's office each month

to pick up and deliver paperwork.     In 1982, Van Valkenberg

brought the joint tenancy deeds to Ebaugh and asked her to put

them in Ebaugh's safe deposit box and not record them.      Van

Valkenberg told Ebaugh to write a note on each deed stating that

the transfer was for no consideration.     Ebaugh did so.   In

addition, Ebaugh wrote on the 7 Diamonte Lane property deed that

the transfer was a gift and the grantor received nothing in

return.

     Van Valkenberg died in 1987.

     In 1988, decedent sought estate planning advice from

Patricia Stoddard (Stoddard), an estate planning attorney,

because he was beginning to have early symptoms of Alzheimer's

disease.    He wanted to arrange his estate while he had capacity.

Stoddard told decedent that he could make nontaxable gifts each
                               - 12 -

year of $10,000 to Ann Van Tine, or he could simply let her

inherit his property.    Decedent told Stoddard that he believed

that Ann Van Tine had earned a joint tenancy in the 7 Diamonte

Lane property by working for VTC for many years.    Decedent told

Stoddard that he put the property at 7 Diamonte Lane in joint

tenancy with Ann Van Tine to compensate her for work for VTC.

     Ann Van Tine did not report her receipt of the joint

tenancies as income on her individual income tax returns.

H.   The Big Bear Lots

     Decedent, Betty Van Tine, Ann Van Tine, and Ebaugh built a

small cabin on two small lots in the Big Bear area.    Ann Van Tine

and Betty Van Tine each owned one of the lots.

     Ebaugh and Ann Van Tine bought about 27 small lots around

the cabin.   Each lot was about 30-feet wide and 80-feet deep.

There were about 20 lots to an acre.    The lots were intended to

be used for family camping.    Ann Van Tine and Ebaugh paid a total

of about $35,000 for the 20 lots.

I.   Decedent's Death and Estate

     Decedent signed his will on August 31, 1988.    In it, he left

any separate property and any community property he may have to

Ann Van Tine.   Decedent's disease worsened in 1989.   He died on
                                - 13 -

May 9, 1993.   His will was not probated because his property was

held in joint tenancy.

     Ann Van Tine was executrix of decedent's estate.    She filed

an estate tax return (Form 706) for the estate.   On it, she

excluded 50 percent of the value of the joint tenancy properties

from decedent's gross estate.    On August 17, 1993, Ann Van Tine

filed an affidavit-Death of Joint Tenant, which allowed her to

receive title for the 7 Diamonte Lane, 2243-45 Sepulveda

Boulevard, and 2255 Sepulveda Boulevard properties.     In

calculating depreciation on her 1993 income tax return, Ann Van

Tine took a full step-up in basis for the 7 Diamonte Lane and

2243-45 Sepulveda Boulevard properties and a 50-percent step-up

for the 2255 Sepulveda Boulevard property and used the date of

death values of the properties to compute her basis.

     The fair market values of the three properties at issue on

May 9, 1993 (decedent's date of death), were $215,000 for the

2243-45 Sepulveda Boulevard property, $345,000 for the 2255

Sepulveda Boulevard property, and $590,000 for the 7 Diamonte

Lane property, for a total of $1,150,000.

     Ann Van Tine sold the 2243-45 Sepulveda Boulevard property

for $215,000 in 1994 and the 7 Diamonte Lane property for

$580,000 in 1995.   In reporting gain from the sale of the 7
                              - 14 -

Diamonte Lane and 2243-45 Sepulveda Boulevard properties, Ann Van

Tine's accountant used the date-of-death value of the properties

plus the cost of improvements as her basis.

     Decedent did not file a gift tax return to report the

transfer of the joint tenancy interest in the 7 Diamonte Lane,

2243-45 Sepulveda Boulevard, or 2255 Sepulveda Boulevard

properties.

J.   Ann Van Tine's Income Tax Returns

     Ann Van Tine reported a total of $540,118 in income from

Ebaugh on her income tax returns from 1970 to 1995, as follows:

                          Income from               Income from
     Year        Ebaugh             Year       Ebaugh

     1970        $7,450             1983      $33,000
     1971         7,450             1984       30,250
     1972         5,000             1985       30,250
     1973         6,988             1986       30,250
     1974         6,530             1987       35,100
     1975         8,450             1988       39,600
     1976        11,050             1989       39,600
     1977        16,750             1990       39,600
     1978        18,000             1991       missing
     1979        18,150             1992       40,800
     1980        23,600             1993       31,500
     1981        28,500             1994        -0-
     1982        32,250             1995        -0-

     Ann Van Tine reported that she lived at 7 Diamonte Lane from

1970 to 1985, and at Big Bear City from 1986 to 1995.    She used

the 7 Diamonte Lane address after she lived at Big Bear Lake.
                               - 15 -

She also reported that she was a medical assistant from 1970 to

1986 and a business manager or business consultant from 1988 to

1995.

     On her 1970, 1971, and 1972 returns, Ann Van Tine deducted

12,000 miles of automobile expenses in connection with her work

for Ebaugh.

                               OPINION

A.   Background

     A decedent's estate includes the date-of-death value of

property he or she owns jointly, except for any part of the value

that the estate shows is attributable to consideration provided

by the surviving joint tenant.    Sec. 2040(a);3 sec. 20.2040-1,


     3
         Sec. 2040(a) provides in part:

          (a) General Rule.--The value of the gross estate
     shall include the value of all property to the extent
     of the interest therein held as joint tenants with
     right of survivorship by the decedent and any other
     person, * * * except such part thereof as may be shown
     to have originally belonged to such other person and
     never to have been received or acquired by the latter
     from the decedent for less than an adequate and full
     consideration in money or money's worth: Provided, That
     where such property or any part thereof, or part of the
     consideration with which such property was acquired, is
     shown to have been at any time acquired by such other
     person from the decedent for less than an adequate and
     full consideration in money or money's worth, there
     shall be excepted only such part of the value of such
                                                   (continued...)
                               - 16 -

Estate Tax Regs.4    The amount excluded from the gross estate is


     3
      (...continued)
     property as is proportionate to the consideration
     furnished by such other person. * * *
     4
         Sec. 20.2040-1(a), Estate Tax Regs., provides:

                 (a) In general. A decedent's gross
            estate includes under section 2040 the value
            of property held jointly at the time of the
            decedent's death by the decedent and another
            person or persons with right of survivorship,
            as follows:

                 (1) To the extent that the property was
            acquired by the decedent and the other joint
            owner or owners by gift, devise, bequest, or
            inheritance, the decedent's fractional share
            of the property is included.

                 (2) In all other cases, the entire
            value of the property is included except such
            part of the entire value as is attributable
            to the amount of the consideration in money
            or money's worth furnished by the other joint
            owner or owners. See section 20.2043-1 with
            respect to adequacy of consideration. Such
            part of the entire value is that portion of
            the entire value of the property at the
            decedent's death (or at the alternate
            valuation date described in section 2032)
            which the consideration in money or money's
            worth furnished by the other joint owner or
            owners bears to the total cost of acquisition
            and capital additions. In determining the
            consideration furnished by the other joint
            owner or owners, there is taken into account
            only that portion of such consideration which
                                                      (continued...)
                                   - 17 -

the part of the date-of-death value of the property which the

consideration furnished by the survivor bears to the total cost

of acquisition and capital additions.          Sec. 2040(a); Estate of

Young v. Commissioner, 110 T.C. 297, 314 (1998); sec.

20.2040-1(a), Estate Tax Regs.        This can be expressed

mathematically (mathematical formula) as follows:

Value of the property1             Consideration furnished             Amount
on the date of death or    X           by the survivor            =   excluded
alternate valuation date           Total consideration paid to
                                   acquire and improve the
                                   property
1
 The parties agree that the entire value of the properties at issue on the
date of death is $1,150,000.

Estate of Young v. Commissioner, supra at 315; Estate of

Goldsborough v. Commissioner, 70 T.C. 1077, 1082 (1978), affd.



      4
       (...continued)
           is shown not to be attributable to money or
           other property acquired by the other joint
           owner or owners from the decedent for less
           than a full and adequate consideration in
           money or money's worth.

            The entire value of jointly held property is
            included in a decedent's gross estate unless
            the executor submits facts sufficient to show
            that property was not acquired entirely with
            consideration furnished by the decedent, or
            was acquired by the decedent and the other
            joint owner or owners by gift, bequest,
            devise, or inheritance.
                               - 18 -

without published opinion 673 F.2d 1310 (4th Cir. 1982).    Thus,

to exclude 50 percent of the date-of-death value of the three

properties at issue from decedent's estate, petitioner must prove

that Ann Van Tine's services to VTC were worth at least 50

percent of the total consideration paid for the acquisition and

improvement of three properties.

     Under section 2040(a), a surviving family member may give

consideration by providing services to a family business.

Berkowitz v. Commissioner, 108 F.2d 319 (3d Cir. 1939), revg. and

remanding a Memorandum Opinion of the Board of Tax Appeals;

Richardson v. Helvering, 80 F.2d 548, 551 (D.C. Cir. 1935).

Petitioner bears the burden of proof.   Rule 142(a); see Estate of

Heidt v. Commissioner, 8 T.C. 969, 974 (1947), affd. per curiam

170 F.2d 1021 (9th Cir. 1948).

B.   Whether Ann Van Tine Provided Substantial Services to Her
     Parents and VTC

     1.   Parties' Contentions

     The parties dispute whether Ann Van Tine provided

substantial services to VTC.   Petitioner contends that Ann Van

Tine worked full time for VTC for more than 30 years and that her

work was full and adequate consideration for her one-half

interest in the three properties at issue.   Respondent contends
                                - 19 -

that the services that Ann Van Tine performed for VTC were

minimal.

     2.     Ann Van Tine's Work for VTC

     Ann Van Tine worked for VTC without pay from around 1955,

when she graduated from high school, until around 1980, when she

moved to Big Bear.     She did some work for VTC in the early

1980's, but less than in earlier years.     She helped her father

with all aspects of construction for VTC.     She supervised

construction of 17 houses for VTC in 1967, listed and sold houses

that VTC built, and managed VTC's rental properties.     She

landscaped the homes and some of the office buildings that VTC

built.     She supervised construction of the home that VTC built

for Garrabrant.

     Ann Van Tine's hobbies and her work for Ebaugh before 1982

were minimal or generally occurred on weekends, and did not

interfere with her work for VTC.     We conclude that Ann Van Tine

provided a substantial service to VTC.

     3.      Respondent's Contentions

             a.   Biased Testimony

     Respondent contends that the testimony of Ann Van Tine and

Ebaugh was self-serving, biased, and incredible.
                               - 20 -

     We decide whether a witness is credible based on objective

facts, the reasonableness of the testimony, the consistency of

statements made by the witness, and the demeanor of the witness.

Quock Ting v. United States, 140 U.S. 417, 420-421 (1891); Wood

v. Commissioner, 338 F.2d 602, 605 (9th Cir. 1964), affg. 41 T.C.

593 (1964).    We may discount testimony which we find to be

unworthy of belief, Tokarski v. Commissioner, 87 T.C. 74, 77

(1986), but we may not arbitrarily disregard testimony that is

competent, relevant, and uncontradicted, Conti v. Commissioner,

39 F.3d 658, 664 (6th Cir. 1994), affg. in part and remanding 99

T.C. 370 (1992) and T.C. Memo. 1992-616.    The testimony of all of

petitioner's witnesses, Ann Van Tine, Ebaugh, Garrabrant, and

Andrade, was consistent and plausible.    There was nothing in the

demeanor of petitioner's witnesses or the content of their

answers that suggests that they were not being truthful.

     Respondent contends that we should not believe Ebaugh's

testimony because Ebaugh and Ann Van Tine lived together at the

time of trial, they shared a trust and commingled funds, and

Ebaugh paid some of petitioner's attorney's fees in this case.

We disagree.    We are not convinced that Ebaugh altered her

testimony to help Ann Van Tine.
                                  - 21 -

            b.     Stoddard's Affidavit

         The parties stipulated that we may treat Stoddard's

affidavit as if it were her testimony.5      Stoddard's affidavit

corroborates the testimony of petitioner's witnesses.

     Respondent points out that respondent could not cross-

examine Stoddard.      This objection, however, was in effect waived

by the stipulation.      Respondent contends that we should disregard

Stoddard's affidavit because it was written by petitioner's

counsel or someone other than Stoddard.       We disagree.   There is

no evidence to suggest anything in the Stoddard affidavit is

untrue.



            c.     Andrade's and Garrabrant's Testimony

     Respondent points out that Andrade and Garrabrant saw Ann

Van Tine cleaning up and delivering materials.      Respondent

contends that Ann Van Tine's help to her father was only sporadic

and menial.      We disagree.   We believe Ebaugh's and Ann Van Tine's

testimony about the nature of Ann Van Tine's services to VTC.


     5
       Respondent reserved a relevancy objection to Stoddard's
affidavit. Stoddard's affidavit is relevant because it tends to
show that decedent intended to transfer a joint tenancy interest
in the 7 Diamonte Lane property to Ann Van Tine as consideration
for her work.
                                - 22 -

Andrade's and Garrabrant's testimony was consistent with that

testimony.

          d.      End of VTC's Construction Activities

     Respondent contends that Ann Van Tine did not provide

services beyond the early 1970's because, according to

respondent, that is when VTC stopped its construction activities.

Decedent was semiretired in 1981 but VTC built homes and managed

apartments in the early 1980's.    On December 15, 1980, decedent

told an IRS representative that he had some condominiums that

would not be completed until 1981 or 1982.    On September 20,

1982, Ebaugh wrote a note evaluating decedent's medical condition

in which she said:    "His daughter is going to take a more active

role in helping * * * business."    Despite this, we believe Ann

Van Tine did not provide a significant service to VTC after 1982.

She moved from 7 Diamonte Lane to Big Bear around 1980.    She

began to work full time for Ebaugh in 1982.    There is no evidence

that VTC constructed anything after the Garrabrant home in 1980.

             e.   Ann Van Tine's Other Activities

     Respondent contends that Ann Van Tine could not have

provided a significant service to VTC because she had many other

activities including growing bonsai trees, keeping German
                              - 23 -

Shepherd dogs, landscaping, selling real estate, and working for

Ebaugh.   We disagree; the time she spent with those activities

did not preclude her from working a substantial amount of time

for VTC before 1980.

                       4.      Conclusion

     We conclude that Ann Van Tine performed a substantial

service for VTC over the years.   However, that conclusion is not

enough for petitioner to prevail for reasons discussed next.

C.   Whether Petitioner Has Shown That Ann Van Tine Furnished
     Consideration as Required by Section 20.2040-1(a), Estate
     Tax Regs.

     1.    Whether Petitioner Has Shown How Much Ann Van Tine's
           Parents Paid To Buy and Improve the Three Properties

     To exclude an amount from decedent's estate under section

2040(a), petitioner must show, among other things, the total

consideration paid to acquire and improve the three properties.

Sec. 2040(a); Estate of Young v. Commissioner, 110 T.C. at 314;

sec. 20.2040-1(a), Estate Tax Regs.    Ann Van Tine's parents

bought the 7 Diamonte Lane property in 1962.    They bought the
                               - 24 -

2255 Sepulveda Boulevard property in 1963 and built an office

building on it in 1964.    Decedent and Moore bought the 2243-45

Sepulveda Boulevard property in 1973.    However, the record does

not show how much Ann Van Tine's parents paid to buy and improve

the three properties.6

     2.     Petitioner's Contentions

     Petitioner contends that it needs to show only that Ann Van

Tine's services were more than minimal or part time.    Petitioner

contends that we stated this standard in Estate of Anderson v.

Commissioner, T.C. Memo. 1989-643, in which we applied section

2040 and section 20.2040-1, Estate Tax Regs.    We disagree.   In

that case, the decedent gave her son a joint interest in

property.    The decedent and her former husband paid $37,000 in

1955 to buy the property.    Estate of Anderson differs from this


     6
       On her 1993 income tax return, Ann Van Tine reported that
her basis for purposes of depreciation was $377,334 for 7
Diamonte Lane and $123,392 for each Sepulveda Blvd. property for
a total of $624,118. Petitioner does not contend that we can
derive decedent's total cost to acquire and improve the
properties from this return.
                                - 25 -

case because we knew how much decedent had paid for the property

($37,000).    We concluded that the value of the decedent's son's

services was sufficient to exclude one-half of the fair market

value of the property from decedent's estate under section

2040(a).    Here, we do not know how much Ann Van Tine's parents

paid to buy and improve the property.

     Petitioner points out that in Berkowitz v. Commissioner, 108

F.2d 319 (3d Cir. 1939), and Estate of Otte v. Commissioner, T.C.

Memo. 1972-76, the estates did not show the dollar values of the

surviving joint tenant's work.     However, those cases are

distinguishable from this case.     In Berkowitz, husband and wife

each contributed $150 in 1892 to start a grocery store.       They

both worked full time for 43 years to operate and develop their

store.     They put profits from their business in jointly owned

property and accounts.     The Court of Appeals for the Third

Circuit said that if the husband and wife had an agreement to

share profits, the fact that the husband and wife had each made a

small initial contribution to start the store and made a complete
                               - 26 -

joint effort over 43 years established that the wife had

contributed at least one-half of the total cost of the jointly

held property.   Berkowitz v. Commissioner, supra at 320-321.     The

Court of Appeals for the Third Circuit noted that it was likely

that the husband and wife had a profit-sharing agreement, but

remanded the case to the Board of Tax Appeals to decide that

issue.   Id. at 321.   This case differs from Berkowitz because

there is no comparable evidence here that Ann Van Tine and her

parents contributed equally to the cost of acquiring and

improving the joint tenancy property or agreed to share profits.

     In Estate of Otte, we knew the cost of the properties that

were at issue.   Some of the costs were $9,000 for 106 acres in

1932, $1,600 for 75 acres in 1937, $2,500 for 25 acres in 1940,

$6,000 for 60 acres in 1942, $10,000 for 100 acres in 1946, $800

for 20 acres in 1947, and $15,500 for 184 acres in 1950.   In

1963, the decedent, his wife, and their son paid $60,500 for 335

acres.   They partitioned the land; decedent and his wife received

120 acres, and the rest went to their son.   The husband and wife
                                - 27 -

worked as a team for 30 years to acquire the property at issue in

that case.   Income from their property belonged to both of them

under Indiana law.   Although we could not trace each transaction,

we held that the taxpayer qualified under section 2040.    Here, we

do not know how much consideration decedent paid to buy and

improve the three properties.

D.   Conclusion

     Ann Van Tine provided a substantial service to VTC.

However, she has not shown what part of the value of the three

properties at issue is attributable to the amount of

consideration that she furnished with those services.7    Thus,

     7
       In light of our conclusion, we need not decide
respondent's contentions that Ann Van Tine's services were not
adequate consideration for the joint tenancy interests at issue
because: (1) Decedent used the transfers into joint tenancy to
avoid probate; (2) Ann Van Tine would have inherited her parents'
property under any circumstances; (3) Ann Van Tine did not report
her receipt of interests in the properties as income on her
individual income tax returns; (4) Ann Van Tine took a full step-
up in basis for 7 Diamonte Lane and one of the Sepulveda Blvd.
properties; (5) the handwritten statements on the joint tenancy
deeds said that Ann Van Tine's father made the conveyances for no
consideration; and (6) there was no agreement between Ann Van
                                                   (continued...)
                             - 28 -

petitioner may not exclude one-half of the value of the three

properties at issue.8

     To reflect the foregoing,


                                           Decision will be

                                 entered for respondent.




     7
      (...continued)
Tine and her parents that Ann Van Tine would work for VTC without
pay until her parents retired in exchange for a joint tenancy
interest in whatever property Ann Van Tine's parents owned at
that time. We also need not decide respondent's contention that
we must subtract the value of the services the Van Tines provided
to Ann Van Tine from the total value of Ann Van Tine's services
to VTC to calculate the net value of services that she provided
for purposes of section 2040(a).
     8
       The Court recently applied Cohan v. Commissioner, 39 F.2d
540 (2d Cir. 1930), to decide the value of services contributed
by a joint tenant. See Estate of Fratini v. Commissioner, T.C.
Memo. 1998-308. Even if we did that here, we could not apply the
mathematical formula stated in Estate of Young v. Commissioner,
110 T.C. 297, 315 (1998), to calculate the amount excluded
because we do not know the cost to buy and improve the three
properties at issue.
