                       T.C. Memo. 1998-428



                     UNITED STATES TAX COURT



          ESTATE OF MARIE S. HUBBERD, DECEASED, JOHN B.
           McNAMARA, JR., AND CLAYBORNE L. NETTLESHIP,
            CO-INDEPENDENT EXECUTORS, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 1941-98.                    Filed December 7, 1998.



     Kevin P. Kennedy, for petitioner.

     Deborah H. Delgado, for respondent.


                       MEMORANDUM OPINION


     ARMEN, Special Trial Judge:   This matter is before the Court

on petitioner's Motion for Partial Summary Judgment.   The issue

for decision is whether a transfer made prior to the decedent's
                               - 2 -


death, if deemed to be a voidable transfer, would be includable

in the gross estate for purposes of the Federal estate tax.1    As

explained in greater detail below, we shall deny petitioner's

Motion for Partial Summary Judgment.

Background2

     Marie S. Hubberd (decedent) owned a 1-percent general

partner interest and 89-percent limited partner interest in a

partnership known as Chapote Y Las Joberas, Ltd. (Chapote).

Between 1989 and 1993, decedent's agent and attorney in fact,

Blackstone Dilworth, Jr. (Dilworth) transferred decedent's 89-

percent limited partnership interest in Chapote.   In particular,

during 1989 through 1993, Dilworth sold varying percentages of

decedent's limited partnership interest in Chapote to six trusts

and made gifts of partnership interests valued at $10,000 each to

Corinda C. Mueller, Kay S. Nettleship, Nancy W. McNamara, Dorothy

W. Abott, Anne C. Callahan, decedent's nieces, and Dan I. Smith,

decedent's nephew.   Decedent's nieces and nephew are identified

in decedent's last will and testament as the sole beneficiaries

of the residue of decedent's estate.

     1
        All section references are to the Internal Revenue Code
in effect at the time of the decedent's death. Except as
otherwise provided, all Rule references are to the Tax Court
Rules of Practice and Procedure.
     2
        The following is a summary of the relevant facts that do
not appear to be in dispute. They are stated solely for the
purpose of deciding the pending motion, and they are not findings
of fact for this case. See Fed. R. Civ. P. 52(a); Rule 1(a).
                               - 3 -


     Petitioner concedes, solely for purposes of this motion,

that the transfers that Dilworth made with respect to decedent's

Chapote limited partnership interest constitute voidable

transfers.

     Prior to decedent's death, neither decedent nor Dilworth (on

behalf of decedent) took any action to avoid the transfer of

decedent's limited partnership interest.

     Decedent died testate on February 9, 1994, in Bexar County,

Texas.   Pursuant to the terms of decedent's last will and

testament, which was admitted to probate in the probate court of

Bexar County, Texas, Dilworth was appointed independent executor

of decedent's estate.   However, Dilworth subsequently resigned as

independent executor and John B. McNamara, Jr. (McNamara) and

Clayborne L. Nettleship (Nettleship) were appointed successor

independent executors of decedent's estate.

     Subsequent to decedent's death, neither Dilworth, McNamara,

nor Nettleship has taken any action to avoid the transfer of

decedent's Chapote limited partnership interest.   Further,

petitioner's Motion for Partial Summary Judgement includes as

attachments affidavits executed by Corinda C. Mueller, Kay S.

Nettleship, Nancy W. McNamara, Dorothy W. Abott, Anne C.

Callahan, and Dan I. Smith that state in pertinent part:

     As a beneficiary under the last will and testament of
     Marie S. Hubberd, I do not desire and have never
     desired that any action be taken to avoid the sale of
     partnership interests.
                               - 4 -


     Respondent issued a notice of deficiency to decedent's

estate determining a deficiency in Federal estate tax in the

amount of $6,084,194.   A portion of the deficiency is

attributable to respondent's determination that petitioner

understated the value of the gross estate by $8,646,350; i.e.,

the value that respondent assigned to decedent's Chapote limited

partnership interest.   The notice of deficiency states in

pertinent part:

     It is determined that the decedent had a legally
     enforceable claim to the ownership of an 89% limited
     partnership interest in Chapote Y Las Joberas, Ltd.
     The purported transfer of this interest by Blackstone
     Dilworth as fiduciary for the decedent was voidable.
     It is also determined that the fair market value of
     this interest is $8,646,350. However, the estate is
     being credited for $180,000 of authorized gifts in
     1990, 1991 and 1992 and $4,089,757 for consideration
     received for partnership interests purportedly sold.
     Accordingly, the taxable estate is increased by
     $4,376,593.

     Petitioner invoked the Court's jurisdiction by filing a

timely petition for redetermination.

     Petitioner moves for partial summary judgment that the value

of decedent's Chapote limited partnership interest is not

includable in the gross estate, notwithstanding that Dilworth's

transfers of the limited partnership interest are conceded to be

voidable transfers for the purposes of the motion.   Petitioner

contends that, under Texas law, a voidable transfer remains valid

and vests title in the transferee until the transfer is

successfully avoided.   Relying upon this principle, petitioner
                               - 5 -


reasons that, because the disputed transfers have not been

avoided, the value of decedent's limited partnership interest is

not includable in the gross estate.    Petitioner further asserts

that its position finds support in the Court's opinions in Longue

Vue Found. v. Commissioner, 90 T.C. 150 (1988), and Estate of

Varick v. Commissioner, 10 T.C. 318 (1948).

     Respondent filed an objection to petitioner's motion.

Respondent contends that if the transfer of decedent's Chapote

limited partnership interest was voidable, the value of that

interest is includable in the gross estate pursuant to section

2033, which provides that the value of the gross estate includes

the value of all property to the extent that the decedent has an

interest in such property at the time of his or her death.    In

the alternative, respondent contends that voidable transfers are

includable in the gross estate pursuant to section 2038, which

governs revocable transfers.

Discussion

     Summary judgment is intended to expedite litigation and

avoid unnecessary and expensive trials.    Florida Peach Corp. v.

Commissioner, 90 T.C. 678, 681 (1988).    Summary judgment may be

granted with respect to all or any part of the legal issues in

controversy "if the pleadings, answers to interrogatories,

depositions, admissions, and any other acceptable materials,

together with the affidavits, if any, show that there is no
                                - 6 -


genuine issue as to any material fact and that a decision may be

rendered as a matter of law."   Rule 121(b); Sundstrand Corp. v.

Commissioner, 98 T.C. 518, 520 (1992), affd. 17 F.3d 965 (7th

Cir. 1994); Zaentz v. Commissioner, 90 T.C. 753, 754 (1988);

Naftel v. Commissioner, 85 T.C. 527, 529 (1985).      The moving

party bears the burden of proving that there is no genuine issue

of material fact, and factual inferences will be read in a manner

most favorable to the party opposing summary judgment.      Dahlstrom

v. Commissioner, 85 T.C. 812, 821 (1985); Jacklin v.

Commissioner, 79 T.C. 340, 344 (1982).

     The Federal estate tax imposes a tax on the transfer of the

taxable estate of every decedent who is a citizen or resident of

the United States.   Sec. 2001; United States Trust Co. v.

Helvering, 307 U.S. 57, 60 (1939).      Section 2051 defines the

taxable estate as the gross estate less deductions.      Section 2031

provides that the gross estate generally comprises all of the

decedent's property, real or personal, tangible or intangible,

wherever situated.

      Section 2033 states in very broad terms:      "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."   For property to be included in the gross estate pursuant

to section 2033, the decedent must have a beneficial interest in

the property.   Sec. 20.2033-1(a), Estate Tax Regs.     Thus, the
                              - 7 -


question presented by petitioner's motion is whether, at the time

of her death, decedent possessed a beneficial interest in the

property transferred by Dilworth, assuming for present purposes

that the transfers were voidable.

     In Morgan v. Commissioner, 309 U.S. 78, 80 (1940), the

Supreme Court stated:

     State law creates legal interests and rights. The
     federal revenue acts designate what interests or
     rights, so created, shall be taxed. * * *

Relying on these principles, petitioner contends that the value

of decedent's Chapote limited partnership interest is not

includable in the value of decedent's gross estate on the ground

that, under Texas law, a voidable transfer vests title in the

transferee until successfully avoided.   In short, petitioner

contends that section 2033 is not applicable insofar as the

disputed transfers were effective to vest legal title in the

transferees.

     Petitioner's focus on the transferees' legal title to the

disputed property is misplaced.   To the contrary, the question

posed under section 2033 is whether the decedent, at the time of

her death, possessed a beneficial interest in the property.     If

the transfers in question constituted voidable transfers, we are

satisfied that the decedent possessed a beneficial interest in

the property; i.e., the right to avoid the transfers and regain

legal title to the property, within the meaning of section 2033.
                               - 8 -


     Section 2033 aside, and again assuming that these were

voidable transfers, we are equally convinced that the value of

decedent's Chapote limited partnership interest would be

includable in the gross estate pursuant to section 2038(a)(1).

Section 2038(a)(1) provides in pertinent part:

         (a) In General.--The value of the gross estate
        shall include the value of all property--

          (1) Transfers after June 22, 1936.--To the extent
     of any interest therein of which the decedent has at
     any time made a transfer (except in case of a bona fide
     sale for an adequate and full consideration in money or
     money's worth), by trust or otherwise, where the
     enjoyment thereof was subject at the date of his death
     to any change through the exercise of a power (in
     whatever capacity exercisable) by the decedent alone or
     by the decedent in conjunction with any other person
     * * * to alter, amend, revoke, or terminate, or where any
     such power is relinquished during the 3-year period ending
     on the date of the decedent's death.

In sum, the value of the gross estate includes the value of any

interest transferred by the decedent, the enjoyment of which is

subject to change by virtue of the decedent's retention of the

power to alter, amend, revoke, or terminate, or where such power

is relinquished during the 3-year period ending with the

decedent's death.

     If Dilworth's transfers of the decedent's Chapote limited

partnership interest constituted voidable transfers, the value of

the property would be includable in decedent's gross estate

pursuant to section 2038.   See, e.g., Estate of Casey v.

Commissioner, 948 F.2d 895 (4th Cir. 1991), revg. on other
                               - 9 -


grounds T.C. Memo. 1989-511 (voidable transfers are includable in

the gross estate pursuant to section 2038).   Simply stated, the

transferees' enjoyment of the property in question would be

subject, at the date of decedent's death, to revocation or

termination through the exercise of a power by the decedent

within the meaning of section 2038(a)(1).3

     We further reject petitioner's contention that, for purposes

of section 2033 or section 2038, the voidable nature of a

transfer is ignored until the transfer is successfully avoided.

Petitioner relies upon Longue Vue Found. v. Commissioner, 90 T.C.

150 (1988), and Estate of Varrick v. Commissioner, 10 T.C. 318

(1948), two cases involving voidable charitable transfers.

However, those cases stand for the narrow proposition that a

charitable gift that is voidable by the decedent's heirs, but

that is not avoided, "is not regarded as creating a contingency

that fails the 'so remote as to be negligible' test of the

regulations under section 2055."   Longue Vue Found. v.

Commissioner, supra at 159.   Because the instant motion concerns

the question whether voidable transfers to the natural objects of

the decedent's bounty are includable in the gross estate, as


     3
        Consistent with our reasoning that the disputed
transfers, if voidable, would be includable in the gross estate
pursuant to sec. 2033 and/or sec. 2038, petitioner's assertion
that the disputed transfers are now final because any suit to
avoid the disputed transfers would be barred by the statute of
limitations is irrelevant.
                                - 10 -


opposed to whether the estate is entitled to a charitable

deduction, the cases relied upon by petitioner are inapposite.

     Consistent with the preceding discussion, petitioner's

Motion for Partial Summary Judgment will be denied.

    To reflect the foregoing,



                                     An order will be issued

                                denying petitioner's Motion

                                for Partial Summary Judgment.
