                           T.C. Memo. 2004-197



                         UNITED STATES TAX COURT



                      LINDA OLSON, Petitioner v.
             COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 8437-03.                 Filed August 31, 2004.



     Barry K. Rothman, for petitioner.

     Laura Beth Salant, for respondent.



                MEMORANDUM FINDINGS OF FACT AND OPINION


        LARO, Judge:   Petitioner petitioned the Court to redetermine

respondent’s determination of a $182,636 deficiency in her 2000

Federal income tax and a $36,459 accuracy-related penalty under

section 6662(a) of the Internal Revenue Code as applicable to

2000.    Following petitioner’s concessions, we are left to decide
                               - 2 -

whether petitioner during 2000 received a $461,709 distribution

from an individual retirement account (IRA).    We hold she did.

                         FINDINGS OF FACT

     Some facts were stipulated and are so found.    The

stipulations of fact and the accompanying exhibits are

incorporated herein by this reference.   Petitioner resided in

Beverly Hills, California, when her petition to this Court was

filed.   She filed a 2000 Federal income tax return that did not

report any distribution received from an IRA.    Prudential

Securities Inc. (Prudential) reported on a 2000 Form 1099-R,

Distributions From Pensions, Annuities, Retirement or Profit-

Sharing Plans, IRAs, Insurance Contracts, etc., that petitioner

had during 2000 received a taxable distribution of $461,709.19

from an IRA.   Respondent in the notice of deficiency determined

the same (rounding the $461,709.19 to $461,709).

     Petitioner’s brother, Peter D. Olson (Olson), died on

November 14, 1998.   When he died, he owned an IRA held in

Prudential account number 004-R68371-N3 (Olson’s account).    The

assets in the IRA at the time of his death included 115,917

shares of the stock of Klever Marketing Inc. (Klever).     Olson, a

founder and director of Klever, received those shares on or

before March 4, 1998.   The Klever stock certificate (certificate)

underlying those shares, number 6278, stated:

     The shares represented by this certificate have not
     been registered under the Securities Act of 1933. The
                                 - 3 -

     shares have been acquired for investment and may not be
     offered, sold or otherwise transferred in the absence
     of an effective Registration Statement for the shares
     under the Securities Act of 1933 or a prior opinion of
     counsel satisfactory to the issuer that registration is
     not required under that Act.

     Petitioner was the sole beneficiary of Olson’s account.    Her

account at Prudential was numbered JQS-027297-N3 (petitioner’s

account).   On February 21, 2000, petitioner signed a 2-page

Prudential form (form) entitled “Distribution Request”.

Prudential gave this form to its account holders who wanted to

request a distribution from a retirement account.   The form

signed by petitioner states on page one that (1) she is the

beneficiary of Olson’s account, (2) Olson died, (3) she, on

account of Olson’s death, is requesting a distribution of all

amounts in Olson’s account in closure thereof, (4) these amounts

consist of cash and securities, (5) these amounts should be

distributed to petitioner’s account by way of a journal entry,

and (6) Prudential should not withhold any Federal or State taxes

from this distribution.   Page 2 of the form bears petitioner’s

signature and handwritten date of February 21, 2000, immediately

below the following statement:

     By signing here, I certify that the information
     provided on this form regarding my status with respect
     to the IRA, SEP-IRA, SARSEP-IRA, SIMPLE IRA, ROTH IRA
     or EDUCATION IRA involved and in all other aspects is
     correct. I also certify that the action directed on
     this form fully complies with the terms of the
     applicable Individual Retirement Agreement. I
     acknowledge that the custodian is not responsible for
     ascertaining the appropriateness of the distribution.
                              - 4 -

     Also, my Federal and State Income Tax withholding
     election is applicable to any subsequent distribution
     until it is revoked by me under the procedure
     established by the custodian. I acknowledge some
     states require withholding if Federal withholding is
     elected. I also acknowledge that certain fees may be
     charged to the account depending on the type of
     distribution I have requested. I also acknowledge that
     funds must be available for the requested gross
     distribution to occur. If you have any questions,
     please call your Financial Advisor * * * for details.

     Prudential made the requested journal entry as of March 3,

2000, and on March 3, 2000, transferred 155,917 Klever shares

from Olson’s account to petitioner’s account.    Prudential valued

these shares at $456,481.14 for purposes of the transfer.

Prudential also in March 2000 transferred $5,228.04 in cash from

Olson’s account to petitioner’s account.1   From March 3 to

December 31, 2000, Prudential included the subject shares and

their value in petitioner’s account and issued to petitioner

statements for that account showing the same with an unexplained

notation “legal documents pending”.   The statement for December

2000 lists the total value of the subject shares at $43,468.88 as

of December 31, 2000, and notes that petitioner had a $413,012.26

unrealized loss on those shares as of that date.

     A transfer agent acts on behalf of an issuer of securities

to record the owners of those securities.   The transfer agent for

Klever stock was Atlas Stock Transfer (Atlas).   On October 30,



     1
       The amount of this cash and the value of the subject
shares total $461,709.19.
                                - 5 -

2001, Klever notified Atlas that petitioner had recently asked it

to lift the restrictive legend as to the shares underlying

certificate number 6278 and to transfer those shares into the

street name of Prudential.    On November 28, 2001, in response to

this notification, Atlas cancelled certificate number 6278 and

issued in the street name of Prudential certificate number 6980

with no restrictive legend.    Street name securities are held by a

company such as Prudential for the benefit of its clients.

Securities held in street name may be placed into an individual’s

account and beneficially owned by the individual although the

owner listed in the transfer agent’s records is a street name.    A

transfer agent usually does not know the identity of the owner of

securities which are recorded in its records in street name.

                               OPINION

     Respondent determined that petitioner received a $461,709

distribution during 2000.    Respondent in support of that

determination focuses on the fact that petitioner, during 2000,

both authorized the distribution and received it in her account.

Petitioner argues that she received no distribution during 2000.

Petitioner focuses on the fact that certificate number 6278 was

not changed during 2000 to reflect any change in the name of the

underlying shares’ owner and that this certificate contained a

legend that prohibited any transfer of the underlying shares
                               - 6 -

unless registered or opined by counsel to be excepted from

registration.

     We agree with respondent that petitioner received the

subject distribution during 2000.2     Contrary to petitioner’s

assertion, the transfer of the subject shares from Olson’s

account to petitioner’s account, to be effective, did not require

that a new certificate be issued to reflect a change of name from

that of the owner shown on certificate number 6278.     As the Court

noted in Meyer v. Commissioner, 46 T.C. 65, 106 (1966), revd. on

other grounds 383 F.2d 883 (8th Cir. 1967), the act of a transfer

agent in recording an ownership change in stock is a

“ministerial, bookkeeping act”, and a change in stock ownership

may occur without any action by a transfer agent and without

regard to whether new certificates are issued to reflect the

transfer.   See also Corliss v. Bowers, 281 U.S. 376, 378 (1930)

(“taxation is not so much concerned with the refinements of title

as it is with actual command over the property taxed”); Byrne v.

Commissioner, 54 T.C. 1632, 1639 (1970) (“an economic interest in

a corporation may arise although a certificate of stock

evidencing such interest has not yet been issued in the name of

the owner”), affd. 449 F.2d 759 (8th Cir. 1971).     Accord


     2
       We decide this issue without regard to which party bears
the burden of proof. We note, however, that taxpayers generally
bear the burden of proof in this Court and that petitioner has
not asserted in her brief that respondent bears the burden of
proof in this case.
                               - 7 -

Helvering v. Rankin, 295 U.S. 123, 127 (1935), where the Supreme

Court described stock transfers of the taxpayer, Turner, stating:

          In none of these transactions did the broker
     deliver to Turner, or Turner to the broker, any stock
     certificate. No specific certificate of stock was ever
     bought or sold by the broker for Turner; and none was
     earmarked or allocated for him in any manner. The
     purchases and sales affecting his account were made
     through the medium of street certificates handled by
     the broker; and the transactions were evidenced solely
     by debits and credits in his account on the broker’s
     books * * *

     Petitioner’s assertion that she acquired the subject shares

only upon Atlas’s issuance of a new certificate is further eroded

by our finding that she was the one who in fact caused Atlas to

issue a new certificate.   Petitioner’s ability to cause the

cancellation of certificate number 6278 and the issuance of

certificate number 6980 is indicative of her ownership of the

subject shares before November 28, 2001, the date on which that

new certificate was issued.   While petitioner points the Court to

Rev. Rul. 81-158, 1981-1 C.B. 205, in search of a contrary

holding, she construes that ruling too narrowly.   Although both

situations in the ruling do conclude that the transfer of stock

occurs when the transfer agent is directed to reissue shares in

the name of the new owner, the ruling does not conclude, as

petitioner would have it be, that a transfer of stock may only

occur when a transfer agent receives such a direction.

     Nor is it dispositive to our decision that certificate

number 6278 contained the referenced restrictive legend.   Given
                                - 8 -

the record before us, the dispositive facts of this case, as we

see it, are fourfold.   First, petitioner intended to effect a

distribution of the subject shares into petitioner’s account

during 2000.   Second, she relayed that intent to Prudential

during 2000.   Third, Prudential carried out that intent during

2000 by transferring the subject shares into petitioner’s

account.   Fourth, petitioner during the last 10 months of 2000

knowingly enjoyed the benefit of the added value of those shares.

     We hold for respondent.3   All arguments in this case have

been considered, and those arguments not discussed herein are

without merit or inapplicable to our decision.4


                                             Decision will be entered

                                        for respondent.




     3
       Petitioner’s request for a contrary holding is most likely
driven by the fact that our holding means that she is liable for
2000 Federal income tax on the value of the subject shares at the
time of distribution, yet her recognition of any loss realized as
to those shares is generally limited to $3,000 per year.
     4
       Petitioner asserts that the value of the subject shares
must be discounted because they were restricted shares which
could not be transferred publicly. Even if we were to assume
that petitioner is correct in her assertion that the subject
shares could not be transferred publicly, an assertion which may
actually be incorrect given the many exceptions set forth in rule
144 of the Securities Act of 1933, 17 C.F.R. sec. 230.144 (2004),
for public transfers, we do not find (nor has petitioner pointed
us to) any evidence in the record upon which to determine such a
discount.
