                        T.C. Memo. 2000-360



                      UNITED STATES TAX COURT



             GABRIEL M. DAYA, ET AL.1 Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket Nos.   9061-98, 9062-98   Filed November 22, 2000.
                   1976-99.



     William E. Taggart, Jr., for petitioners.

     H. Clifton Bonney, Jr., for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     DEAN, Special Trial Judge:   Respondent determined the

following deficiencies in and accuracy-related penalties to be

added to petitioners’ Federal income taxes:


     1
       Cases of the following petitioners are consolidated
herewith: Morhaf M. Daya, docket No. 9062-98; and Gabriel M.
Daya, docket No. 1976-99.
                                - 2 -

Gabriel Mahmoud Daya (Gabriel), docket Nos. 9061-98 and 1976-99:

                                  Penalty
     Year       Deficiency      Sec. 6662(a)
     1995        $1,620            $324
     1996         1,515             303

Morhaf Michael Daya (Morhaf), docket No. 9062-98:

                                  Penalty
     Year       Deficiency      Sec. 6662(a)
     1995        $1,312            $262

Unless otherwise indicated, section references are to the

Internal Revenue Code in effect for the years in issue, and all

Rule references are to the Tax Court Rules of Practice and

Procedure.   The cases have been consolidated for purposes of

trial, briefing, and opinion.

     The issues for decision are:

     1.   Whether Gabriel is entitled to dependency exemption

deductions for his father in taxable years 1995 and 1996.     We

hold that he is not.

     2.   Whether Gabriel is entitled to head of household filing

status in taxable years 1995 and 1996.    We hold that he is not.

     3.   Whether Morhaf is entitled to head of household filing

status in taxable year 1995.    We hold that he is not.

     4.   Whether Gabriel is entitled to claim mortgage interest

deductions in taxable years 1995 and 1996 in excess of that

allowed by respondent.   We hold that he is not.

     5.   Whether Morhaf is entitled to a mortgage interest

deduction in taxable year 1995.    We hold that he is not.
                                - 3 -

     6.    Whether Gabriel is entitled to property tax deductions

in taxable years 1995 and 1996 in excess of those allowed by

respondent.    We hold that he is not.

     7.    Whether Morhaf is entitled to a property tax deduction

in taxable year 1995.    We hold that he is not.

     8.    Whether the underpayment of tax required to be shown on

Gabriel’s 1995 and 1996 Federal income tax returns is due to

negligence or to disregard of rules or regulations.      We hold that

it is.

     9.    Whether the underpayment of tax required to be shown on

Morhaf’s 1995 Federal income tax return is due to negligence or

disregard of rules or regulations.      We hold that it is.

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

The stipulation of facts and the attached exhibits are

incorporated herein by reference.

                          FINDINGS OF FACT

     At the time petitions were filed for his 1995 and 1996

taxable years, Gabriel resided in Fremont, California.        At the

time the petition was filed for his 1995 taxable year, Morhaf

resided in Foster City, California.

     Petitioners are brothers who in August of 1983 emigrated from

Syria to the United States with their family (the Mahmoud Daya

family).    Members of the Mahmoud Daya Family include petitioners'

father, Mahmoud Gabriel Daya (Mahmoud), petitioners' mother, Laila
                               - 4 -

C. Daya (Laila), and petitioners' younger brother, Mayar Daya

(Mayar).   Before moving to the United States, Mahmoud, together

with his identical twin brother, Fuad Daya (Fuad), purchased a

single family residence located at 913 Laguna Circle, Foster City,

California (Foster City residence).

     Fuad, who immigrated to the United States in 1953, had

arranged for the purchase of the Foster City residence so that his

brother’s family would have a place to live when they arrived in

the United States.   In addition to money contributed by both

Mahmoud and Fuad, the acquisition of the Foster City residence was

financed with a loan secured by a mortgage in Mahmoud and Fuad’s

names from the Bank of America.   Title to the Foster City

residence was conveyed by a grant deed executed on April 18, 1983,

and recorded on April 25, 1983, to:

     Mahmoud G. Daya, a married man, as his sole and
     separate property
     Fuad G. Daya, a married man, as his sole and separate
     property

     The Mahmoud Daya family, including both petitioners, resided

at the Foster City residence from the time of their arrival in the

United States in 1983 through December 31, 1996.   By November 21,

1989, Gabriel, Morhaf, Mahmoud, and Laila had all become citizens

of the United States.

     Petitioners did not hold legal title to the Foster City

residence at anytime during 1995.   On or about March 20, 1996, a

“gift deed” was executed evidencing the transfer of legal title to
                               - 5 -

an undivided one-fifth interest in Mahmoud’s undivided one-half

interest in the Foster City residence from Mahmoud to Gabriel and

Morhaf.   This gift deed was recorded on March 21, 1996.    On

January 17, 1997, a series of four grant deeds effecting the

consolidation of title to the Foster City residence in Mahmoud and

Laila, as joint tenants, was recorded.2   Mahmoud and Laila then

executed a grant deed on January 24, 1997, and recorded the deed

on June 25, 1997, evidencing the transfer of title to the Foster

City residence to Mahmoud, Laila, Gabriel, and Morhaf “All As

Their Interest May Appear".

     Mahmoud and his brother Fuad were involved in business

together under the corporate name Daya International Commerce and

purchased a restaurant in San Francisco in 1987.   In 1989, they

sold the restaurant and accepted a note from the group that

purchased the restaurant as payment.   Later that year the building

was destroyed by an earthquake.   The buyers of the restaurant

defaulted on the note.   Mahmoud and Fuad attempted to collect on

the note, but the buyers filed for bankruptcy.   As a result of the

default, Mahmoud and Fuad were liable for approximately a quarter

of a million dollars on a note to the previous owner of the

restaurant.   Fuad paid the entire obligation, and Mahmoud




     2
       One grant deed transferred Gabriel’s interest, one
transferred Morhaf’s, one transferred Fuad and his wife,
Martha’s, and one transferred Mahmoud’s interest.
                                - 6 -

transferred his half ownership of a building in San Francisco to

Fuad as partial payment for his obligation on the note.

     The financial disaster devastated Mahmoud, and he became

severely depressed.    He also developed diabetes.   He was under

medical care for both his diabetes and depression, and he was

unable to work.    At some point, Mahmoud became eligible for

supplemental income payments (SSI) from the Social Security

Administration on account of his disability.    Mahmoud received SSI

of $6,672 in 1995 and $7,517 in 1996.    Neither Mahmoud nor Laila

filed a Federal income tax return for taxable years 1990 through

1996.   On August 5, 1999, just over a month before trial, Mahmoud

died.

     Fuad helped support the Mahmoud Daya family after Mahmoud

became disabled.    Later, when Gabriel and Morhaf obtained full-

time employment, they helped support their family.     The financial

support available to the Mahmoud Daya family during the years in

issue consisted of Mahmoud’s SSI, Fuad’s contributions to the

family, and a portion of Gabriel and Morhaf’s income.

     In 1995 Gabriel was employed by Sbarro, Inc. and Taco Bell

Corporation and earned $19,115 in wages, net of deductions and

withholdings.   In 1996 Gabriel was employed by Sbarro, Inc. and

earned $18,871 in wages, net of deductions and withholdings.     In

1995 and 1996, Morhaf was employed by Nordstrom Incorporated
                                 - 7 -

(Nordstrom) and earned $21,340 and $29,450 in wages, net of

deductions and withholdings, in the respective years.

     During 1995 and 1996, the Mahmoud Daya family maintained

three checking accounts at Bank of America and one checking

account at Glendale Federal Bank.    Gabriel maintained Bank of

America account No. 04879-09049 (Gabriel’s checking account) as

his personal checking account.    Morhaf maintained Bank of America

account No. 00407-06172 (Morhaf’s checking account) as his

personal checking account.   Glendale Federal Bank account No. 558-

703707-2 (household checking account) was maintained as an account

for the payment of the Mahmoud Daya family’s household expenses.

Mahmoud and Laila maintained Bank of America account No. 02810-

05978 (Mahmoud and Laila’s checking account) as their personal

checking account.

     Mahmoud also had unrestricted access to Glendale Federal Bank

checking account No. 558-703483-1 (Fuad’s Glendale Federal

account) that Fuad opened for Mahmoud to use.    Although the

account was in Fuad’s name and contained Fuad’s money, Mahmoud had

the ability to withdraw money from the account at any time for any

purpose.

     Gabriel established the household checking account as a means

for Laila to pay household expenses.     The account was held in his

name, and Laila was a signatory named as attorney in fact.

Gabriel, Morhaf, and Fuad all contributed money to the household
                                - 8 -

checking account in 1995 and 1996.      Deposits and interest paid

into the account totaled $32,531.88 in 1995 and $24,502.34 in

1996.    Disbursements from the account totaled $35,513.83 in 1995

and $24,480.82 in 1996.

     Of the $35,513.83 disbursed from the household checking

account in 1995, Gabriel identified the source of $4,919.31 as his

paycheck deposits or otherwise attributable to him.3     Also

deposited into the account in 1995 were two checks payable to

Mahmoud from Fuad totaling $17,500, a $1,000 check payable to

Gabriel from Fuad, and a $3,000 check drawn on a Bank of America

Customline account secured by the Foster City residence.        Interest

accrued on and paid into the household checking account in 1995

totaled $37.02.    The specific source of $9,057.50 of the funds

disbursed from the household account in 1995 has not been

identified.

     Copies of 16 checks drawn on the account in 1995 are not

available; however, most of the checks written on the account were

signed by Laila.    The following is a summary of identifiable

disbursements from the account:




     3
       Gabriel testified that an $809.11 deposit made on Dec. 28,
1994, and an $813.64 deposit made on Jan. 9, 1995, into the
household account were his paychecks. He also testified that $42
of another deposit was from his funds. These amounts, along with
four other deposits of $813.64 each, represent the total amount
of deposits made to the household account that we attribute to
Gabriel.
                               - 9 -


     Payee                                         Amount
     Ghassam Khalaf D.D.S.                         $215.00
     Bank of Americard Visa                      1,754.36
     TCI Cablevision                                259.21
     Around the World                               160.00
     Hamaz Kayim                                     50.00
     Morhaf Daya                                    800.00
                                                1
     Bank of America Customline account           6,714.37
                                              2
     Bank of America Loan #4540719              13,101.09
     Pacific Bell                                 2,880.78
     P.G.& E.                                       164.00
     Lee Buffington County Tax                    1,541.05
     Costco Wholesale                                32.61
     Fire Insurance Exchange                        931.00
     Farmers Insurance Exchange                     115.25
     DMV Renewal                                    217.00
     Bank of America 5273029820505152             1,380.00
     Sanual Bank                                     18.00
     Mayar Daya                                   1,000.00

         Total                                 31,333.72
           1
            This amount includes check No. 180 in the
     amount of $605.56, which was not included in the
     “Schedule of Checks for 1995”, but which we infer
     from the record to be a payment on the Bank of
     America Customline account.
           2
            This amount includes check No. 178 in the
     amount of $1,060.10, which was not included in the
     “Schedule of Checks for 1995”, but which we infer from
     the record to be a payment on Bank of America loan
     No. 4540719.

The record provides no additional information as to these

disbursements.   Petitioners offered no testimony regarding the

nature of these expenditures, and offered copies of checks into

evidence only to show the date, amount, and payee.4


     4
       Petitioners objected to the introduction of the memo
notations on the checks entered into evidence unless there was
                              - 10 -

     Although Gabriel testified that he recognized some of the

deposits into the household checking account in 1996, he failed to

identify any such deposits or provide us with a means to determine

which deposits were his paychecks.   Checks totaling $2,600 payable

to Gabriel written by Morhaf on Morhaf’s checking account were

deposited in 1996 into the household checking account.5      The

remaining deposits made into the account were from funds provided

by Gabriel, Morhaf, and Fuad; petitioners, however, have provided

no breakdown of the specific amounts attributable to each.         The

following are identifiable disbursements from the household

account in 1996:

     Payee                                     Amount
     Pacific Bell                               $1,212.40
                                              1
     Bank of America Loan #4540719              13,621.38
                                                2
     Bank of America Customline account           7,170.83
     Lee Buffington C.T.C.                        1,543.43
     John Zahar                                     100.00
     Department of Parking, Traffic                  25.00
     Discover                                        69.28
     Farmers Ins. GRP of COS                        420.00
     Econo Door                                      54.50
     Michael Daya                                   200.00

         Total                                 24,416.82
           1
            This amount includes check No. 264 in the
     amount of $1,107.99, which was not included in the
     “Schedule of Checks for 1996”, but which we infer
     from the record was payment on Bank of America loan


specific testimony at trial from the individual who made the
notation.
     5
       Deposits in 1996 attributable to Morhaf’s checks to
Gabriel include $300 on Mar. 6, $300 on May 9, $500 on Jun. 14,
$300 on Jul. 9, $300 on Aug. 16, $300 on Sept. 5, $300 on Oct. 9,
and $300 on Dec. 6.
                                - 11 -

     No. 4540719.
          2
           This amount includes check No. 265 in the
     amount of $596.83, which was not included in the
     “Schedule of Checks for 1996”, but which we infer
     from the record was payment on Bank of America
     Customline account.


Petitioners have provided no additional information as to the

nature of these expenditures.

     Gabriel’s checking account was maintained for personal

expenditures.   He also made withdrawals from the account when

extra money was required to maintain the Foster City residence.

Deposits into the account in 1995 for which petitioners presented

records totaled $6,017.07, and disbursements for which records

were presented totaled $6,424.42.6    Gabriel identified several of

the deposits into the account in 1995 as his paychecks.    The

record provides no evidence as to the amount of any funds from

Gabriel’s checking account used to support his family in 1995.

Most of the disbursements from the account were in the form of

cash withdrawals.   The record provides no information regarding

Gabriel’s checking account in 1996.

     Morhaf’s checking account primarily was used during 1995 to

pay his personal expenses.   He deposited no money directly into

the household checking account in 1995, but he gave money to his



     6
       Bank statements for Gabriel’s checking account were
admitted into evidence for the following periods: (1) Dec. 14,
1994, through Mar. 15, 1995; (2) May 13 through Aug. 15, 1995;
and (3) Sept. 14 through Dec. 12, 1995.
                               - 12 -

mother to deposit into the household account and for groceries.

Deposits into Morhaf’s checking account from January 1 through

December 5, 1995, totaled $29,888.63.   Of this amount, $14,625.94

of the deposits can be identified as Morhaf’s payroll checks from

Nordstrom.   In 1995, Morhaf deposited a $3,765 check from Fuad’s

Glendale Federal account written and signed by Mahmoud into his

checking account.   The sources of other deposits into Morhaf’s

checking account include unidentified Nordstrom paychecks and

funds repaid to Morhaf by friends and family for whom Morhaf had

purchased items using his credit and discount as an employee of

Nordstrom.   Disbursements from Morhaf’s checking account in 1995

totaled $26,119.81.   Of this amount, $1,776.13 was disbursed for

expenditures classified as “Utilities (Pacific Bell, etc.)”,

$668.74 was disbursed for “Household (Safeway, Lucky, etc.)”,

$1,096.07 was disbursed for “Transportation (Automobile)”, and

$131 was disbursed for “Medical & Dental”.7

     The sole evidence regarding Morhaf’s checking account in 1996

is a summary of 14 checks drawn on the account and copies of the

checks.   These checks represent at least some of Morhaf’s



     7
       These amounts are drawn from a “Summary of Account
Disbursements” and copies of checks. The summary was prepared
from bank statements covering periods from Dec. 7, 1994, through
Dec. 5, 1995. Although we are unable to ascertain which payments
are included under the various categories in the summary,
respondent has not reserved any objections to this summary. We
thus accept the summary as fact. Because the summary covers part
of 1994, we have, however, deducted payments made to Pacific Bell
in 1994 from the total listed under “Utilities” in the summary.
                                - 13 -

contributions to his family.8   Checks payable to Gabriel total

$3,500.   There is also a check payable to “Dad’s Visa” for $200,

and two checks payable to Lee Buffington for property taxes on the

Foster City residence totaling $3,121.16.

     Mahmoud’s SSI was deposited regularly into Mahmoud and

Laila’s checking account.   The total amount deposited into Mahmoud

and Laila’s checking account in 1995 for which petitioners

presented records is $6,112.56.9   The total amount disbursed from

the account in 1995 for which petitioners presented records is

$6,582.37.10   The following is a summary of identifiable

disbursements from Mahmoud and Laila’s account in 1995:




     8
       Morhaf testified that the checks represent “My
participation in the house. I mean, whatever we’re short,
whatever, we put in.”
     9
       The record includes bank statements from Mahmoud and
Laila’s checking account beginning Jan. 31, 1995, and ending on
Dec. 28, 1995.
     10
       A “Schedule of Checks for 1995” reflects checks written
from Dec. 26, 1994, through Dec. 29, 1995, with only 1 check (No.
2422) unaccounted for.
                                - 14 -

     Payee                                       Amount
     P.G. & E.                                 $2,041.44
     Father Gregory Ofresh                        100.00
     Bank of America Customline account           583.26
     Farmer Insurance Exchange                    257.55
     Tom Kohara                                   350.00
     Syrian American Association                   50.00
     Estero Utility Services                      457.30
     Pacific Bell                                 889.50
     B.F.I.                                       123.84
     Mayar Daya                                   150.00
     Morhaf Daya (or Michael Daya)                542.00
     T.C.I.                                       175.14
     AAA                                           60.00
     Post Master “Stamp”                           32.00
     City of Foster City                          120.34

        Total                                   5,932.37

The record contains no additional information regarding these

expenditures.    Petitioners presented no evidence regarding Mahmoud

and Laila’s checking account in 1996.

     Fuad provided money to the Mahmoud Daya family in 1995 and

1996.   He did not expect to be reimbursed.   In addition to Fuad’s

two checks totaling $17,500 payable to Mahmoud and his $1,000

check payable to Gabriel, Fuad provided additional funds to the

family in 1995.   Mahmoud wrote and signed two checks on Fuad’s

Glendale Federal account:   A $3,765 check payable to Morhaf and a

$1,543 check payable to Lee Buffington for property taxes on the

Foster City residence.   Fuad’s contributions in 1996 consisted of

at least one check payable to Gabriel for $1,000.

     There were two outstanding loans in the names of Mahmoud and

Fuad secured by deeds of trust on the Foster City residence in

1995 and 1996:    Bank of America loan No. 4540719 (mortgage) and
                               - 15 -

Bank of America Customline account No. 1537948839 (home equity

line of credit), which was changed to account No.

02500211814947041 in July 1995.   Interest was incurred on the two

loans in the amounts of $18,606 in 1995 and $18,378 in 1996.

Petitioners did not assume a legal obligation on Mahmoud’s and

Fuad’s indebtedness in 1995 or 1996.

     Payments made by the Mahmoud Daya family on the home equity

line of credit in 1995 totaled $7,297.63, with $6,714.37 of the

total paid from the household account and $583.26 paid from

Mahmoud and Laila’s checking account.   Payments made by the

Mahmoud Daya family on the mortgage in 1995 totaled $13,101.09 and

were made with checks from the household account.

     The Mahmoud Daya family made payments on the home equity line

of credit in 1996 with checks drawn from the household account

totaling $7,170.83.   Payments were made on the mortgage in 1996

with checks from the household account totaling $13,621.38.

     California real property tax statements for the Foster City

residence were in the names of Mahmoud and Fuad in both 1995 and

1996.   Real property taxes of $3,082 were assessed against the

residence for the fiscal year ending (FYE) June 30, 1995.   The tax

liability was due in two equal installments.   The first

installment was due on or before November 1, 1994, with a 10-

percent penalty for payments after December 10, 1994, and the

second installment was due on or before February 1, 1995, with a
                                - 16 -

10-percent penalty plus $10 cost for payments after April 10,

1995.   Laila made a payment of $1,541.05 for property taxes with a

check from the household checking account dated March 23, 1995.

     The real property tax liabilities on the Foster City

residence for the 2 subsequent fiscal years were each due in two

equal installments under the same terms as the property tax for

the preceding year.   For FYE June 30, 1996, the real property

taxes assessed against the Foster City residence were $3,086.

Mahmoud made a payment of $1,543.43 with a check dated December 2,

1995, drawn on Fuad’s Glendale Federal bank account and signed by

Mahmoud.   Laila made a payment of $1,543.43 with a check from the

household account dated March 20, 1996.   For FYE June 30, 1997,

the real property taxes assessed against the Foster City residence

were $3,122.   The property taxes were paid with checks from

Morhaf’s personal checking account dated December 1, 1996, and

December 29, 1996, in the amount of $1,560.58 each.

     On his 1995 and 1996 Federal income tax returns, Gabriel

claimed his father as a dependent and head of household filing

status.    Gabriel also claimed deductions of $9,303 and $9,189 for

home mortgage interest and deductions of $1,532 and $1,543 for

property taxes in 1995 and 1996, respectively.

     On his 1995 Federal income tax return, Morhaf claimed his

mother as a dependent and head of household filing status.     He
                                - 17 -

also claimed a mortgage interest deduction of $9,303 and a

property tax deduction of $1,532.

     In notices of deficiency, respondent determined Gabriel was

not entitled to dependency exemption deductions for Mahmoud and to

head of household filing status for tax years 1995 and 1996.

Respondent further determined Gabriel was not entitled to

deductions for home mortgage interest expense and for property tax

expense in 1995.   Respondent disallowed all but 5 percent of

Gabriel’s deductions for home mortgage interest expense and for

property tax expense in 1996.    As a result of respondent’s

adjustments, Gabriel’s itemized deductions for each of the years

in issue were reduced to amounts less than the allowable standard

deduction.   Gabriel’s tax liability, therefore, was determined

using the standard deduction for each of the years in issue.

     Respondent determined Morhaf was not entitled to head of

household filing status and to deductions for mortgage interest

expense and property tax expense in taxable year 1995.

Respondent’s determination reduced Morhaf’s itemized deductions to

an amount less than the standard deduction in 1995; thus, Morhaf’s

tax liability was determined using the standard deduction.

                                OPINION

     Deductions are strictly a matter of legislative grace, and

taxpayers must satisfy the specific requirements for any deduction

claimed.   See INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84
                                - 18 -

(1992); New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440

(1934).   Taxpayers are required to maintain records sufficient to

substantiate their claimed deductions.    See sec. 6001; sec.

1.6001-1(a), Income Tax Regs.    Petitioners bear the burden of

showing error in respondent’s determinations contained in the

notice of deficiency.11   See Rule 142(a); Welch v. Helvering, 290

U.S. 111, 115 (1933).

Dependency Exemption Deductions

     The first issue for decision is whether Gabriel is entitled

to dependency exemption deductions for his father for tax years

1995 and 1996.   Section 151(c)(1) allows a taxpayer to claim an

exemption for each qualifying dependent.    A taxpayer's father or

mother whose gross income for the calendar year is less than the

exemption amount is considered the taxpayer's dependent if the

taxpayer provides more than half the father or mother's support

for the calendar year.    See secs. 151(c)(1)(A), 152(a).

Respondent does not dispute that Mahmoud’s gross income was less

than the exemption amount, but contends that Gabriel did not


     11
       The Internal Revenue Service Restructuring & Reform Act
of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 685, 724-727,
added sec. 7491, which shifts the burden of proof to the
Secretary in certain circumstances. Sec. 7491, however, is
applicable to court proceedings arising in connection with
examinations commencing after July 22, 1998. Petitioners do not
contend, nor does the record show, that their examinations
commenced after July 22, 1998, or that sec. 7491 is applicable to
them.
                                - 19 -

provide more than half his father’s support in 1995 and 1996.

     Petitioners suggest Federal tax law does not require

taxpayers to show that expenditures of support were paid from

specific sources.   They argue that they contributed all the funds

that went into the household account, that most of the expenses of

supporting the Mahmoud Daya family were paid with funds from the

household account, and that neither Federal income tax law nor

logic prevents them from agreeing that Gabriel’s contributions

toward the support of the family be considered to be made on

behalf of his father and that Morhaf’s contributions be considered

on behalf of his mother.12   We disagree with petitioners’

interpretation of both the facts and the law.

     To qualify for dependency exemption deductions, a taxpayer

must establish the total support costs expended on behalf of a

claimed dependent from all sources for the year, and the taxpayer

must demonstrate that he provided over half of this amount.    See

Archer v. Commissioner, 73 T.C. 963, 967 (1980); Turecamo v.

Commissioner, 554 F.2d 564, 569 (2d Cir. 1977), affg. 64 T.C. 720

(1975); Blanco v. Commissioner, 56 T.C. 512, 514-515 (1971); sec.

1.152-1(a)(2)(i), Income Tax Regs.   If the amount of total support

is not established and cannot be reasonably inferred from


     12
       We note that neither Morhaf or Fuad filed a written
declaration that he would not claim Mahmoud as a dependent in
1995 or 1996 in accordance with sec. 152(c)(4) such that we
should consider whether Gabriel could be treated as having
provided over half of Mahmoud’s support under the provisions of
sec. 152(c), Multiple Support Agreements.
                               - 20 -

competent evidence available to the Court, it is not possible to

conclude that the taxpayer claiming the exemption provided more

than one-half of the support of the claimed dependent.   See Blanco

v. Commissioner, supra.

      The claimed dependent’s contributions toward his or her own

support are part of the total support computation and include

“income which is ordinarily excludable from gross income, such as

benefits received under the Social Security Act.”   Sec. 1.152-

(1)(a)(2)(ii), Income Tax Regs.   Only the amount of such income

actually spent on the individual’s support is considered in

determining support for purposes of the dependency exemption.     See

Carter v. Commissioner, 55 T.C. 109 (1970).

      “The term ‘support’ includes food, shelter, clothing, medical

and dental care, education, and the like.”    Sec. 1.152-1(a)(2)(i),

Income Tax Regs.   Although the amount of an item of support is

usually its cost, where lodging is furnished to an individual, the

amount of support is the fair market value of such lodging.     See

id.

      If several members of a household contribute toward expenses

which are equally applicable to the support of each member of the

household and there is no evidence of actual support for

individual members of a household, the contributing members are

presumed to have pooled their contributions to support the

household, and each member of the household is considered to have
                                 - 21 -

received an equal part of the contributions as part of his

support.   See De La Garza v. Commissioner, 46 T.C. 446 (1966),

affd. per curiam 378 F.2d 32 (5th Cir. 1967).    Similarly, when an

individual outside the household not sharing in the common fund

contributes funds to the support of the household, that

individual’s contributions are allocated equally to each member of

the household.   See Cogan v. Commissioner, T.C. Memo. 1971-251.

Any “amount contributed to a common family fund by a particular

member of the household is deemed to have been supplied in full

for his support when such amount is less than his aliquot share of

the entire fund.”     De La Garza v. Commissioner, supra at 449.

     On brief petitioners state that sums from various bank

accounts can be identified as payments for items constituting

expenditures for support within the meaning set forth in section

1.152-1(a)(2)(i), Income Tax Regs.    Petitioners, however, have not

identified those payments which they believe constitute support,

and we are unable to determine how they computed their support

figures, except that it is clear they included mortgage interest

and personal property tax payments on the Foster City residence in

their calculations.

     Gabriel has failed to establish the total amount expended on

Mahmoud’s support from all sources in 1995 and 1996.    He likewise

has failed to establish his own contributions toward his father’s

support.   Gabriel’s only testimony regarding support he provided
                               - 22 -

to his father was that his mother used funds from the household

checking account to purchase food for the family and to pay

household expenses.   The record does include copies of checks

drawn from the various accounts which provide some evidence of

support expenditures.   Aside, however, from a summary of

disbursements from Morhaf’s checking account in 1995, petitioners

have provided us with no evidence of the nature of the

expenditures beyond what we are able to infer from the record and

the name of the payee on the checks.

     From the evidence presented at trial, we are able to identify

a total of $11,095.15 as 1995 expenditures for the support of the

Mahmoud Daya family within the meaning set forth in section 1.152-

1(a)(2)(i), Income Tax Regs.   The total amount of identified

support expenditures in 1995 includes:   (1) $3,735.99 from the

household checking account; (2) $3,671.94 from Morhaf’s checking

account; and (3) $3,687.22 from Mahmoud and Laila’s checking

account.   The following is a summary of the expenditures from each

of these accounts which we have identified as constituting

support:

           Household Checking Account

     Payee                          Amount
     Ghassam Khalar D.D.S.          $215.00
     TCI Cablevision                 259.21
     Pacific Bell                  2,880.78
     P.G.&E.                         164.00
     DMV Renewal                     217.00

        Total                      3,735.99
                               - 23 -




           Morhaf’s Checking Account

     Item                              Amount
     Utilities                         $1,776.13
     Household                            668.74
     Transportation                     1,096.07
     Medical & Dental                     131.00

         Total                         3,671.94

     Mahmoud and Laila’s Checking Account

     Payee                             Amount
     P.G.&E.                           $2,041.44
     Estero Utility Services              457.30
     Pacific Bell                         889.50
     B.F.I.                               123.84
     T.C.I.                               175.14

         Total                         3,687.22

     The only expenditures we can identify as constituting support

for the Mahmoud Daya family in 1996 within the meaning set forth

in section 1.152-1(a)(2)(i), Income Tax Regs., are the payments

from the household account to Pacific Bell totaling $1,212.40.

     It is evident from the record that many items required to be

included in the total support calculation are absent in both

years.   Petitioners have failed to provide any evidence of

expenditures made for food or clothing.     They also have not

provided evidence of the fair rental value of the Foster City

residence.

     Petitioners rely on the mortgage interest and property tax

payments made on the Foster City residence during the years at
                               - 24 -

issue to show the value of the Mahmoud Daya family’s lodging.    The

value of a claimed dependent’s lodging must be included as part of

his total support; it is well settled, however, that the proper

measure for valuing lodging for purposes of determining support is

the fair rental value of the premises allocable to the claimed

dependent and not the actual mortgage payments and property taxes

paid for maintaining the household.     See Pierce v. Commissioner,

66 T.C. 840, 849 (1976); Blarek v. Commissioner, 23 T.C. 1037,

1039 (1955); Keegan v. Commissioner, T.C. Memo. 1997-511; Pierce

v. Commissioner, T.C. Memo. 1981-254; Gilliam v. Commissioner,

T.C. Memo. 1969-188, affd. per curiam 429 F.2d 570 (4th Cir.

1970); Tourte v. Commissioner, T.C. Memo. 1969-143; Sumner v.

Commissioner, T.C. Memo. 1969-156; Coary v. Commissioner, T.C.

Memo. 1969-25; sec. 1.152-1(a)(2)(i), Income Tax Regs.

Petitioners have not provided any evidence from which we could

conclude that the mortgage payments and property taxes are in any

way related to the fair rental value of the Foster City residence.

See Coary v. Commissioner, supra.     Without evidence of the fair

rental value of the residence, Gabriel cannot establish Mahmoud’s

total support.   See Sumner v. Commissioner, supra; Coary v.

Commissioner, supra.

     Petitioners assume they should be credited with supplying the

Mahmoud Daya family’s lodging during the years in issue, but it is

the owner of the premises who is to be credited with providing the
                                - 25 -

lodging as support.    See Pierce v. Commissioner, supra, 66 T.C. at

849-850; Livingston v. Commissioner, T.C. Memo. 1976-211.      If the

claimed dependent is the owner of the premises in which the

taxpayer resides rent free, the sum of the taxpayer’s

contributions toward the support of the claimed dependent should

be offset against the value of the lodging furnished to the

taxpayer.    See Hahn v. Commissioner, 22 T.C. 212, 215 (1954).    To

determine the value of the lodging provided to a claimed

dependent, the fair rental value of lodging should be divided

equally among the members of a household if all members of the

household have free access to the entire home.     See Tourte v.

Commissioner, supra.

     During 1995, Mahmoud and Fuad were the sole holders of legal

title to the Foster City residence.      The record does not provide

any evidence from which we could conclude that Gabriel had

equitable or beneficial ownership of the residence in 1995.     See

infra.    Mahmoud, therefore, provided at least half of the fair

rental value of the residence toward the support of his family in

1995.13   See Gilliam v. Commissioner, 429 F.2d 570, 571 (4th Cir.

1970), affg. per curiam T.C. Memo. 1969-188; Livingston v.

Commissioner, supra.    Thus, not only is Mahmoud’s contribution of


     13
       Although we make no such finding, there is some evidence
in the record suggesting that Fuad may have held bare legal title
to the Foster City residence such that Mahmoud should be credited
with full ownership of the residence. See Trans v. Commissioner,
T.C. Memo. 1999-233; Uslu v. Commissioner, T.C. Memo. 1997-551;
Conroy v. Commissioner, T.C. Memo. 1958-6.
                               - 26 -

lodging to himself considered in determining his total support for

the year, but Gabriel must offset any support he provided to

Mahmoud by the value of the lodging that Mahmoud provided him.

     On March 20, 1996, Gabriel and Morhaf acquired title through

a gift deed to an undivided 10-percent interest in the Foster City

residence.   Gabriel is considered to have provided 5 percent (half

of the interest he shared with Morhaf) of the fair rental value of

the residence for a portion of the year.   Mahmoud, however,

continued to have legal ownership of an undivided 45 percent of

the Foster City residence in 1996 and therefore, as in 1995,

provided the value of his own lodging for the year and a portion

of his family’s lodging, including Gabriel’s.

     Even if we were to ignore Mahmoud’s contribution toward his

own support and the support of his family in the form of the fair

rental value of the Foster City residence and accept the actual

cost of maintaining the Foster City residence (mortgage interest

payments and property taxes) as the appropriate value of lodging

to be included in the support computation, Gabriel still has not

provided a sufficient basis for us to determine that he provided

over half of Mahmoud’s support during the years in issue.

     Gabriel suggests it is unfair to place the burden upon him of

proving he provided over half of Mahmoud’s support when he and his

brother contributed almost all of the money that supported the

Mahmoud Daya family.   But see Rivers v. Commissioner, 33 T.C. 935,
                               - 27 -

937 (1960)(finding that the taxpayer has the burden of

establishing his right to dependency exemptions and that the Court

is not authorized or required to conjecture as to the total amount

expended on the support of a taxpayer’s claimed dependent).    The

record, however, reflects that Mahmoud had significant potential

sources of support other than Gabriel and Morhaf.   See Terauds v.

Commissioner, T.C. Memo. 1997-64 (finding taxpayer not entitled to

dependency exemption for daughter because there was evidence

daughter was receiving support from additional sources, and

taxpayer did not establish daughter’s total support for year).

     Neither petitioners nor Fuad testified that the copies of

checks drawn on Fuad’s various bank accounts that are included in

the record constituted his total contributions to the Mahmoud Daya

family during the years at issue.   Petitioners provided no

evidence reflecting the total activity of Fuad’s Glendale Federal

bank account to which Mahmoud had full access during the years at

issue.   Fuad testified that he opened the Glendale Federal bank

account in his name and gave Mahmoud signatory authority on the

account so that Mahmoud could use the account for “his house”.     He

further testified that the account was “very inconvenient” for him

to use but that he opened the account at Glendale Federal Bank

because it was within walking distance of the Foster City

residence and convenient for Mahmoud.   Petitioners offered no

explanation as to why Fuad would go to the trouble to establish a
                               - 28 -

checking account specifically for Mahmoud’s convenience if Mahmoud

were only going to draw two checks on the account over the course

of 2 years.   The record also fails to establish the total activity

in Fuad’s other two accounts on which he wrote checks for the

benefit of the Mahmoud Daya family.

     In addition, the record provides no evidence regarding

Mahmoud and Laila’s checking account in 1996 and little evidence

regarding Morhaf’s checking account in 1996.    Petitioners offered

no explanation for their failure to produce evidence regarding

these potential sources of Mahmoud’s support.   Their failure to

introduce evidence that is within their control gives rise to a

presumption that the evidence, if provided, would be unfavorable

to them.   See Cluck v. Commissioner, 105 T.C. 324, 338 (1995);

Wichita Terminal Elevator Co. v. Commissioner, 6 T.C. 1158, 1165

(1946), affd. 162 F.2d 513 (10th Cir. 1947).

     The amount of money available for support reflected in the

record does not support Gabriel’s contention that he provided more

than half of his father’s support during the years in issue.

Morhaf provided at least $3,671.94 for the support of the Mahmoud

Daya family in 1995.   Mahmoud received $6,672 in SSI and two

checks from Fuad totaling $17,500 in 1995.   Gabriel argues that

the $17,500 should be considered support provided by him because

the money was a gift to him and Morhaf from Fuad.   He also argues

that he should be credited with providing the $17,500 for the
                                 - 29 -

support of Mahmoud in any case because the money was deposited

into the household checking account.      We disagree with both

arguments.

     The two checks were payable to Mahmoud and have memo

notations indicating that they are for “Perry’s Settlement”.      Fuad

testified that the checks represent the amount to which Mahmoud

would be entitled for the settlement of Daya International’s legal

dispute if Mahmoud had not owed Fuad money.      Fuad further

explained: “I loan Mahmoud, to his family, so he can eat.       Because

I loan him many other things.”    When pressed for additional

information, Fuad indicated the checks were a gift.      The record as

a whole suggests that Fuad provided the $17,500 to Mahmoud to

enable Mahmoud to provide for his family but that Mahmoud was

under no obligation to spend the money in any particular manner or

to repay Fuad.   Despite petitioners’ contentions in their brief,

nothing in the record indicates the money was a gift to Gabriel or

Morhaf from Fuad.

     The deposit of the $17,500 into the household checking

account does not mean that the money should be attributed to

Gabriel for determining his contributions to Mahmoud’s support

simply because Gabriel was the owner of the account.      The record

does not suggest that Gabriel received the money from his father
                               - 30 -

as an outright and unconditional gift.14   See Sheldon v.

Commissioner, T.C. Memo. 1969-170.   The facts and circumstances do

not support a finding of donative intent on the part of Mahmoud.

See In re Marriage of Jacobs, 180 Cal. Rptr. 234 (Ct. App.

1982)(without donative intent, no gift has been made).      Gabriel’s

own testimony indicates that the household account was established

to pay expenses of the Mahmoud Daya family and that Laila was

given signatory authority over the account so that she could pay

household expenses.   Gabriel had a separate checking account to

cover his personal expenditures.   In fact, all of the mortgage

payments on the Foster City residence in 1995 were made from the

household account, as were most of the payments on the home equity

line of credit and half of the property taxes due for the year.

By depositing the checks from Fuad in the household checking

account, Mahmoud pooled the $17,500 with Gabriel, Morhaf, and

Fuad’s funds so that Laila would have funds at her disposal to

cover household expenses.   In our view the household account was a

“common family fund”, and the contributing members should each be

credited with having pooled the amount of their individual

contributions.   See De La Garza v. Commissioner, 46 T.C. at 448-


     14

 Even if Mahmoud did intend for Gabriel to have unrestricted use
of the $17,500, it could constitute reimbursement for any funds
expended by Gabriel on behalf of Mahmoud. See Jewell v.
Commissioner, 69 T.C. 791, 801-802 (1978).
                                - 31 -

449.

       Nothing in the record suggests that Mahmoud intended to

transfer beneficial interest of the money to Gabriel.    See Lehmann

v. Kamp, 77 Cal. Rptr. 910 (Ct. App. 1969).    Instead, the record

supports a finding that the money was deposited into the household

account for the limited purpose of paying household expenses.

Under these circumstances, Gabriel, as owner of that account, was

acting as a trustee for the benefit of his family.

       A trust contemplates a fiduciary relationship with
       respect to property, wherein the person holding title is
       held to an equitable obligation to deal with or use the
       property for the benefit of another. The legal
       relationship results from a manifestation of an intent
       to create a trust, and the relationship is thereafter
       classified by the nature of that intent. [Askew v.
       Resource Funding, Ltd., 156 Cal. Rptr. 208, 210 (Ct.
       App. 1979) (citing Bogert, The Law of Trusts and
       Trustees, sec. 1, at 1-3 (2d ed. 1965)).]

Here, the intent to create a trust relationship, if not

specifically expressed by the parties, can be inferred from the

facts and circumstances surrounding their relationship and the

nature of the household account.    See id. (distinguishing between

express and resulting trust and finding it unnecessary to dwell on

the precise nature of the trust where the indicia of a trust

relationship are evident).    Thus, Gabriel was not the equitable

owner of the money, and it should not be credited to him for

purposes of determining his contributions to the support of

Mahmoud.
                                 - 32 -

     Mahmoud also had access to Fuad’s Glendale Federal account on

which he wrote at least two checks in 1995.    One of these checks

was written to cover property taxes in the amount of $1,543.43 on

the Foster City residence.     The other check was made payable to

Morhaf for $3,765 and may have been used to reimburse Morhaf for

household expenses or to cover household expenses.    Also, $3,000

advanced from the home equity line of credit in Mahmoud and Fuad’s

names was deposited into the household account in 1995.    Thus,

Mahmoud had available for his support in 1995 at least $32,480.4315

attributable either to himself or to Fuad.    In addition, Morhaf

had wages, net of deductions and withholding, of $21,340, and at

least $3,671.94 of this amount was expended on the support of the

Mahmoud Daya family in 1995.

     In 1995 Gabriel earned wages, net of deductions and

withholding, of $19,115.   His 1995 Federal income tax return lists

other income totaling $516.    Gabriel also received a $1,000 check

from Fuad in 1995.   Although Fuad’s testimony suggests that all of

his contributions to the members of the Mahmoud Daya family were

made for the family’s general support, it is not clear that

Gabriel was under any obligation to use the funds in a particular

manner.   Thus, Gabriel had a total of $20,631 which he could have

provided for the support of the Mahmoud Daya family in 1995.



     15
       This amount includes Mahmoud’s SSI of $6,672, Mahmoud’s
checks from Fuad totaling $17,500, the two checks totaling
$5,308.43 Mahmoud drew on Fuad’s Glendale Federal account, and
$3,000 drawn on the home equity line of credit.
                                - 33 -

       The record, however, reflects that Gabriel did not contribute

all of his income toward the support of his family.    Gabriel

testified that he maintained his personal checking account

primarily to cover personal expenses.    Gabriel failed to produce

bank records for his personal checking account for approximately

13 weeks in 1995.    The records he did produce indicate that

deposits into the account totaled $6,017.07.    Gabriel testified

that he recognized deposits into the account as deposits of

paychecks and money.    Nothing in the record indicates that Gabriel

received funds from others to deposit into this account.    Thus, no

more than $14,613.93 of the deposits into the household checking

account in 1995 could be attributable to Gabriel.16

       Gabriel identified only $4,919.31 of the deposits into the

household account as his paychecks or otherwise attributable to

him.    But even if Gabriel had spent $14,613.93 on the support of

the Mahmoud Daya family in 1995, he still contributed $39,206.5017

less than the money potentially available for the support of the

family from Mahmoud, Fuad, and Morhaf.


       16
       Although Gabriel held legal title to the funds in the
household account, we find that Mahmoud, Fuad, and Morhaf’s
contributions to the account were not intended as gifts to
Gabriel but that Gabriel was entrusted with the funds to meet the
expenses of the Mahmoud Daya family. See supra pp. 30-31. Thus,
the funds should not be credited to Gabriel for purposes of
determining his contributions to the support of Mahmoud.
       17
       This amount represents Mahmoud’s SSI of $6,672, Mahmoud’s
checks from Fuad totaling $17,500, checks totaling $5,308.43
drawn by Mahmoud on Fuad’s account, $3,000 drawn on the home
equity line of credit, and Morhaf’s net wages of $21,340, which
totals $53,820.43 minus Gabriel’s $14,613.93.
                                 - 34 -

     In 1996, Mahmoud received $7,517 of SSI.     Morhaf had wages,

net of deductions and withholding, of $29,450.     As previously

discussed, the record is not clear as to the extent these funds

were expended for the support of the Mahmoud Daya family and as to

the amount of funds provided by Fuad to the family.     It is clear,

however, that at least $36,96718 was available for the support of

the Mahmoud Daya family from sources other than Gabriel in 1996.

     Gabriel’s 1996 wages, net of deductions and withholding, were

$18,871, and he reported other income totaling $597.     Gabriel also

received a check from Fuad for $1,000, which was deposited into

the household account.     Morhaf wrote checks payable to Gabriel in

1996 totaling $3,500; however, Morhaf indicated that these checks

were not for Gabriel’s personal use but constituted his

“participation in the house”.     Thus, the most Gabriel could have

contributed toward the support of his family in 1996 was $20,468.

     Gabriel, however, provided no evidence of how much money he

deposited into the household checking account in 1996, nor did he

provide any evidence regarding his personal checking account in

1996.     Even if Gabriel contributed the entire $20,468 to the

support of his family, there was at least $36,967 potentially

available for support from other sources.

     Accordingly, Gabriel is not entitled to dependency exemption

deductions for his father in 1995 or in 1996.



     18
       This figure is derived from the sum of Mahmoud’s SSI of
$7,517 and Morhaf’s wages of $29,450.
                                 - 35 -

Head of Household Filing Status

     As relevant to petitioners’ cases, section 2(b) defines a

head of household as an individual taxpayer who is not married at

the close of the taxable year, and who maintains a household which

constitutes for such taxable year the principal place of abode of

the father or mother of the taxpayer if the taxpayer is entitled

to a deduction for the taxable year for his father or mother under

section 151.   An individual is considered to maintain a household

only if he furnishes over half the cost of maintaining the

household during the taxable year.    See sec. 2(b).    Expenditures

considered for purposes of claiming head of household filing

status are different in certain respects from those considered for

purposes of the dependency exemption support test.      See Teeling v.

Commissioner, 42 T.C. 671, 682-684 (1964); sec. 1.152-1(a)(2)(i)

and 1.2-2(d), Income Tax Regs.    The cost of maintaining a

household consists of the “expenses incurred for the mutual

benefit of the occupants thereof by reason of its operation as the

principal place of abode of such occupants”.    Sec. 1.2-2(d),

Income Tax Regs.   Such expenses include “property taxes, mortgage

interest, rent, utility charges, upkeep and repairs, property

insurance, and food consumed on the premises.”    Id.

     Respondent maintains that Gabriel does not qualify for head

of household filing status in 1995 or 1996 because he is not

entitled to claim his father as a dependent in either year and he
                              - 36 -

did not maintain a household in either year.   Having concluded

Gabriel is not entitled to dependency exemptions for his father

under section 151 in 1995 or 1996, we hold that Gabriel is not

entitled to head of household filing status in either year.

     With respect to Morhaf, respondent concedes that he provided

more than one-half of the support in 1995 for his mother within

the meaning of section 1.152-1(a)(2)(i), Income Tax Regs., and as

such is entitled to a dependency exemption deduction for her.

Respondent, however, maintains that Morhaf is not entitled to head

of household filing status in 1995 because he has not established

that he paid more than half of the expenses of maintaining a

household for his mother.

     To determine whether Morhaf maintained a household for Laila

in 1995, we first must decide what constituted Laila’s household.

Petitioners argue that there were two separate households within

the Foster City residence during 1995 and 1996:   One consisting of

Gabriel and Mahmoud and one consisting of Morhaf and Laila.19

Although respondent agrees that it is possible for two separate

households to exist under one roof, respondent argues that the

members of the Mahmoud Daya family were all part of one household

in 1995 and 1996.




     19
       Although Mayar resided at the Foster City residence
during 1995 and 1996, petitioners have not indicated of which
household he was a member.
                                - 37 -

     Both Gabriel and Morhaf testified that they lived as one

family in the Foster City residence during 1995 and 1996.    Gabriel

testified that the family shared a kitchen and living area and

that his mother bought food for the entire family.    Petitioners

have identified no separate expenditures for the support of

individual members of the household or for the maintenance of two

separate households.    Nothing in the record indicates that two

separate households existed within the Foster City residence.      See

Estate of Fleming v. Commissioner, T.C. Memo. 1974-137 (finding

two separate households where common living areas were shared but

each household had “private quarters” occupying an entire level of

the shared house, and each household maintained a separate

telephone, subscribed to its own magazines, and gave separate

gifts and charitable contributions).     We therefore find that the

members of the Mahmoud Daya family constituted one household

during 1995 and 1996.

     On brief, Morhaf states that $668.74 was disbursed from his

checking account during 1995 in identifiable payments for items

constituting expenditures for the maintenance of a household

within the definition set forth in section 1.2-2(d), Income Tax

Regs.   Although we are unable to determine the specific expenses

which make up the $668.74 total, this number corresponds with the

disbursements characterized as “Household” disbursements in the

1995 summary of disbursements from Morhaf’s checking account.
                                - 38 -

Because respondent raised no objection to the amount or its

classification, we treat this amount as expended for the

maintenance of the Mahmoud Daya family’s household in 1995.

     The only other evidence of Morhaf’s contributions toward the

maintenance of the Mahmoud Daya family’s household in 1995

consists of Gabriel and Morhaf’s testimony that Morhaf gave money

to his mother to deposit into the household checking account and

that he gave her money for groceries.    Petitioners make no attempt

to estimate these contributions, and they have provided no basis

upon which we can estimate these contributions.   We thus credit

Morhaf with contributing $668.74 toward the maintenance of the

Mahmoud Daya household in 1995.

     Although the record does not clearly reflect all the expenses

incurred for maintaining the Mahmoud Daya family’s household in

1995, the record does indicate that $18,606 in mortgage interest

payments was made and $3,084.48 in property taxes was paid on the

Foster City residence.   Morhaf has not shown that he paid any of

these expenses or any other expenses for the maintenance of the

household beyond the $668.74.   Morhaf has not established that he

provided more than half the cost of maintaining a household for

Laila in 1995.20

     Accordingly, we uphold respondent’s determination that


     20
       We note that even if we accepted Morhaf’s argument that
he maintained a household for Laila separate from Gabriel and
Mahmoud’s household, Morhaf still has not shown that he provided
more than half the cost of maintaining such a household.
                               - 39 -

Gabriel is not entitled to head of household filing status in 1995

and 1996, and Morhaf is not entitled to head of household filing

status in 1995.

Mortgage Interest Deductions

     Section 163(a) allows a deduction for all interest paid or

accrued within the taxable year on indebtedness.   Section

163(h)(1), however, provides that, in the case of a taxpayer other

than a corporation, no deduction is allowed for personal interest.

Qualified residence interest is excluded from the definition of

personal interest and thus is deductible under section 163(a).

See sec. 163(h)(2)(D).   Qualified residence interest is any

interest which is paid or accrued during the taxable year on

acquisition indebtedness or home equity indebtedness.    See sec.

163(h)(3)(A).   Acquisition indebtedness is any indebtedness

secured by the qualified residence of the taxpayer and incurred in

acquiring, constructing, or substantially improving the qualified

residence.   See sec. 163(h)(3)(B).   Home equity indebtedness is

any other indebtedness secured by the qualified residence to the

extent the aggregate amount of such indebtedness does not exceed

the fair market value of the qualified residence reduced by the

amount of acquisition indebtedness on the residence.    See sec.

163(h)(3)(C)(i).   The amount of home equity indebtedness for any

taxable year cannot exceed $100,000.    See sec. 163(h)(3)(C)(ii).
                                 - 40 -

     The indebtedness generally must be an obligation of the

taxpayer and not an obligation of another.    See Golder v.

Commissioner, 604 F.2d 34, 35 (9th Cir. 1979), affg. T.C. Memo.

1976-150.   Section 1.163-1(b), Income Tax Regs., however, provides

in pertinent part:

     Interest paid by the taxpayer on a mortgage upon real
     estate of which he is the legal or equitable owner, even
     though the taxpayer is not directly liable upon the bond
     or note secured by such mortgage, may be deducted as
     interest on his indebtedness.

The Court of Appeals for the Ninth Circuit, to which an appeal in

this case would lie, construed the foregoing regulation to permit

interest deductions in nonrecourse lending situations where the

taxpayer is not personally liable on a mortgage.    See Golder v.

Commissioner, supra.     Although the taxpayer is not directly liable

on the debt, the taxpayer must pay the mortgage to avoid

foreclosure.   Thus, section 1.163-1(b), Income Tax Regs.,

recognizes the economic substance of nonrecourse borrowing and

allows an interest deduction to a taxpayer, who, in the situations

contemplated in the regulation, is not directly liable on the

mortgage indebtedness.    See id.

     Relying on the same rationale underlying the interpretation

in Golder of section 1.163-1(b), Income Tax Regs., we have held

that taxpayers who do not hold legal title to property but who

establish they are equitable owners of the property are entitled

to deduct mortgage interest paid by them with respect to the
                                - 41 -

property.   See Trans v. Commissioner, T.C. Memo. 1999-233; Uslu v.

Commissioner, T.C. Memo. 1997-551; Conroy v. Commissioner, T.C.

Memo. 1958-6.

     In the case at bar, petitioners each claimed a deduction for

50 percent of the mortgage interest incurred on the Foster City

residence in 1995 and 1996.   Respondent disallowed the entire

mortgage interest deductions claimed by both petitioners in 1995

and disallowed Gabriel’s deduction for all but 5 percent of the

mortgage interest paid on the property in 1996 on the basis that

petitioners have not established:   (1) The interest associated

with the indebtedness on the property was qualified residence

interest; (2) they had a legal or equitable interest in the

property in 1995; (3) the indebtedness on the property was theirs;

and (4) they personally paid the interest.

     Although petitioners offered no direct testimony that Bank of

American loan No. 4540719 was acquisition indebtedness and that

the total indebtedness at issue did not exceed the fair market

value of the Foster City residence, we are satisfied the record

sufficiently establishes that the interest paid on these loans

constitutes qualified residence interest.

     During 1995 petitioners had no legal obligation to make

mortgage payments on the Foster City residence, nor did they hold

legal title to the residence.   Mahmoud and Fuad were the legal
                               - 42 -

owners of the residence,21 and the two loans secured by the

residence were in Mahmoud and Fuad’s names.    The mere fact the

Foster City residence was petitioners’ personal residence does

not, as petitioners suggest, entitle them to deduct mortgage

interest payments made on the residence.    See Loria v.

Commissioner, T.C. Memo. 1995-420; Tuer v. Commissioner, T.C.

Memo. 1983-441.   To be able to deduct any payments of mortgage

interest in 1995, petitioners must establish that they were the

beneficial or equitable owners of the Foster City residence.    See

Trans v. Commissioner, supra; Uslu v. Commissioner, supra; Conroy

v. Commissioner, supra.

     We are unable to find any substance in petitioners’

contentions that they were the beneficial or equitable owners of

the residence in 1995, and we are unable to determine on what

legal theory they base their claims.    Although Federal law

determines the tax consequences of an interest or right in

property, State law determines the nature of the interests and

rights in property.   See Morgan v. Commissioner, 309 U.S. 78

(1940).   Petitioners have provided no evidence that under

California law they were the beneficial or equitable owners of the



     21
       Although petitioners argue that Fuad and Mahmoud
“acquired title” to the residence and that only Mahmoud
“purchased” the residence, Fuad’s testimony does not support
their argument: “I bought the house and he [Mahmoud] gave me
money from back home, and I put my money, so we bought it
together.”
                                 - 43 -

Foster City residence.     See, e.g., Bainbridge v. Stoner,106 P.2d

423, 427 (Cal. 1940) (discussing equitable ownership arising by

virtue of express, resulting, and constructive trusts).

      Petitioners argue that they considered all the members of

their immediate family to own the residence.     They also point to

Fuad’s testimony that he considered the Mahmoud Daya family to be

the owners of the Foster City residence.     Fuad’s testimony,

however, was contradictory at times.      He also testified regarding

the Foster City residence:    “That’s my house, also * * * I bought

it.   My name is on it.”   The record as a whole suggests that Fuad

was interested in helping his brother, Mahmoud, and Mahmoud’s

family and that he thereby purchased the Foster City residence

with Mahmoud so that the family would have a place to live.      It

does not follow that Fuad held bare legal title and that Gabriel

and Morhaf held an equitable interest in the residence.

      Although petitioners may have contributed toward the mortgage

payments and property taxes due on the Foster City residence and

resided in the home, these facts are insufficient to establish

that petitioners held the benefits and burdens of ownership such

that they could be considered equitable owners of the residence.

See Colston v. Burnet, 59 F.2d 867, 869-870 (D.C. Cir. 1932),

affg. 21 B.T.A. 396 (1930); Bainbridge v. Stoner, supra.

Petitioners did not contribute to the downpayment on the

residence, the record provides no evidence that petitioners made
                                - 44 -

any payments on the residence for the 12 years preceding the years

at issue that they and their family resided in the home, and

petitioners did not indicate they had entered into any agreement

with their father or uncle that would entitle them to an ownership

interest in the home.   See Trans v. Commissioner, supra; Uslu v.

Commissioner, supra.

     We therefore sustain respondent’s determination disallowing

Gabriel and Morhaf’s mortgage interest deductions in 1995.

     On March 20, 1996, Mahmoud executed a gift deed transferring

one-fifth of his one-half interest in the Foster City residence,

which gave Gabriel and Morhaf each an undivided one-twentieth

legal interest in the Foster City residence.   Morhaf’s 1996 tax

year is not at issue, but Gabriel contests respondent’s

disallowance of a deduction for all but 5 percent of the mortgage

interest paid on the residence in 1996.   The issue we must resolve

is whether Gabriel is entitled to a mortgage interest deduction

larger than his proportionate share.

     Generally, a taxpayer may deduct more than his proportionate

share of mortgage interest arising from property held as a tenant

in common where the taxpayer paid such expenses to avoid personal

liability or to preserve his interest in the property he holds as

a tenant in common.    See Powell v. Commissioner, T.C. Memo. 1967-

32; Conroy v. Commissioner, T.C. Memo. 1958-6.   We have found,

however, that a taxpayer was not entitled to deduct more than his
                                 - 45 -

proportionate share of mortgage interest where he was entitled to

reimbursement for payments in excess of his proportionate share

under State law, and he in fact received contribution from his

cotenants.   See James v. Commissioner, T.C. Memo. 1995-562.

     Gabriel had no personal liability on the loans; however, his

interest in the Foster City residence would have been subject to

foreclosure if the mortgage payments had not been paid.    See

Jamison v. Cotton, 28 P.2d 39, 40 (Cal. Ct. App. 1933).

California recognizes the right of a cotenant to contribution from

his fellow cotenants for his mortgage payments on the common

property in excess of his proportionate share.    See Conley v

Sharpe, 136 P.2d 376 (Cal. Ct. App. 1943); Willmon v. Koyer, 143

P. 694 (Cal. 1914).22     Therefore, Gabriel may deduct mortgage

interest payments beyond his proportionate share to the extent he

actually made the payments and did not receive reimbursement from

his fellow cotenants.   See Powell v. Commissioner, supra; Conroy

v. Commissioner, supra.

     Gabriel, however, has not established the extent to which the

1996 mortgage interest payments were made with his funds.    See

Wells v. Commissioner, T.C. Memo. 1990-58.    Although all mortgage

payments on the Foster City residence in 1996 were made from the

household checking account, which was in Gabriel’s name, Gabriel


     22
       It is not clear, however, whether a personal judgment
against a cotenant in such a situation is obtainable. See Conley
v. Sharpe, 136 P.2d 376 (Cal. Ct. App. 1943).
                               - 46 -

has failed to establish the source of all the deposits into the

account.   He testified that two of his cotenants, Morhaf and Fuad,

contributed to the account in 1996.     Assuming arguendo that

Gabriel was the beneficial as well as legal owner of all the money

in the household account, see supra pp. 31-32, Morhaf and Fuad’s

deposits into the account would constitute reimbursement for

expenditures made on their behalf.    Gabriel, therefore, is not

entitled to mortgage interest deductions in 1996 beyond the 5

percent respondent allowed.

     For the foregoing reasons, we uphold respondent’s

determinations with respect to petitioners’ mortgage interest

deductions.

Property Taxes

     Section 164 allows a deduction for certain taxes, including

State and local real property taxes.     In general, taxes are

deductible only by the person upon whom they are imposed.     See

sec. 1.164-1(a), Income Tax Regs.    As in the case of mortgage

interest, we have held that taxpayers who do not hold legal title

to property but who establish they are equitable owners of the

property are entitled to deduct property taxes paid by them with

respect to the property.   See Trans v. Commissioner, T.C. Memo.

1999-233; Uslu v. Commissioner, T.C. Memo. 1997-551; Conroy v.

Commissioner, supra.   Also, a taxpayer may deduct more than his

proportionate share of property taxes arising from property held
                               - 47 -

as a tenant in common where the taxpayer paid such expenses to

avoid personal liability or to preserve his interest in the

property he holds as a tenant in common.    See Powell v.

Commissioner, supra; Conroy v. Commissioner, supra.

     Respondent disallowed Gabriel and Morhaf’s property tax

deductions with respect to the Foster City residence in 1995.     In

1996, respondent denied Gabriel a deduction for all but 5 percent

of the property tax paid on the residence.

     As previously discussed, Gabriel and Morhaf were not the

legal or equitable owners of the Foster City residence in 1995.

The property tax statements were in the names of Mahmoud and Fuad.

Therefore, petitioners are not entitled to any deduction for

property taxes paid on the Foster City residence in 1995.

     In 1996, Gabriel held legal title to an undivided one-

twentieth interest in the Foster City residence.    Under California

law, all tenants in common are duty bound to pay property taxes in

proportion to their ownership interest in the commonly held

property.   See Conley v. Sharpe, supra.    The property taxes are a

lien upon real property, and their nonpayment subjects the

property to sale in satisfaction of them.    See id.   Although

Gabriel had no obligation to pay more than his share of the taxes

due on the residence, payment of the taxes was necessary to

preserve the Foster City residence and his rights and interests
                                  - 48 -

therein.    See Powell v. Commissioner, supra.

     Gabriel, however, has failed to establish that he paid the

$1,543 he claimed as a deduction for property taxes on his 1996

return.    Although a payment in this amount was made from the

household checking account in 1996, Gabriel has failed to

establish the extent to which these funds are attributable to him.

Moreover, the record supports a determination that he was

reimbursed by his cotenants.

     Accordingly, we uphold respondent’s determinations with

respect to petitioners’ deductions for property tax.

Section 6662(a) Penalties

     Finally, we address the accuracy-related penalties of section

6662(a).    Section 6662(a) and (b)(1) provides that if any portion

of an underpayment of tax is attributable to negligence or

disregard of rules or regulations, then there shall be added to

the tax an amount equal to 20 percent of the amount of the

underpayment that is so attributable.      “Negligence” includes any

failure to make a reasonable attempt to comply with the statute,

and “disregard” includes any careless, reckless, or intentional

disregard.    See sec. 6662(c).   We have further defined negligence

as the failure to exercise the due care that a reasonable and

ordinarily prudent person would employ under the same

circumstances.    See Neely v. Commissioner, 85 T.C. 934, 947

(1985).
                                - 49 -

     If a taxpayer establishes that he acted in good faith and

there was reasonable cause for the underpayment, the taxpayer will

not be liable for the penalty under section 6662.    See sec.

6664(c).   The determination of whether a taxpayer acted with

reasonable cause and in good faith is made on a case-by-case

basis, taking into account all the pertinent facts and

circumstances.   See sec. 1.6664-4(b)(1), Income Tax Regs.   The

most important factor is the extent of the taxpayer's efforts to

assess his proper tax liability.   See id.

     A taxpayer who reasonably relies in good faith on competent

professional advice may in some circumstances avoid liability for

negligence penalties.   See Freytag v. Commissioner, 89 T.C. 849,

888 (1987), affd. 904 F.2d 1011 (5th Cir. 1990), affd. on other

issue 501 U.S. 868 (1991); sec. 1.6664-4(b)(1) and (c), Income Tax

Regs.   Such reliance, however, is “not an absolute defense to

negligence, but rather a factor to be considered.”     Freytag v.

Commissioner, supra.    To establish good faith reliance on the

advice of a competent adviser, a taxpayer must show:    (1) That he

provided the return preparer with complete and accurate

information, (2) that an incorrect return resulted from the

preparer's mistakes, and (3) that the taxpayer was relying in good

faith on the advice of a competent return preparer.    See Cramer v.

Commissioner, 101 T.C. 225, 251 (1993), affd. 64 F.3d 1406 (9th

Cir. 1995).
                                - 50 -

     Respondent determined petitioners’ underpayments of tax are

attributable to negligence.    Petitioners maintain they were not

negligent and that they reasonably relied in good faith on their

income tax return preparer.    Petitioners bear the burden of

proving that the negligence penalty is inapplicable.23     See Rule

142(a); Welch v. Helvering, 290 U.S. 111 (1933); Bixby v.

Commissioner, 58 T.C. 757, 791-792 (1972).

     Petitioners exhibited a lack of due care in determining their

proper income tax liability.    They both failed to maintain records

to substantiate their entitlement to the deductions at issue and

to head of household filing status.      In 1995, both claimed

deductions for expenses related to the Foster City residence when

they held neither legal or beneficial ownership of the residence.

Moreover, without any reasonable basis, they attributed to

themselves Fuad’s checks to Mahmoud totaling $17,500 in

considering their entitlement to deductions and head of household

filing status.


     23
       Although petitioners make no reference to sec. 7491(c),
which was enacted by the Internal Revenue Service Restructuring &
Reform Act of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 685,
726, they appear to invoke its rule requiring the Secretary to
carry the burden of production with respect to additions to tax.
Sec. 7491(c), however, is only applicable to court proceedings
arising in connection with examinations commencing after July 22,
1998. Of the three notices of deficiency giving rise to this
case, two were issued prior to July 22, 1998 and one was issued
on Dec. 3, 1998. Petitioners do not contend, nor are we
persuaded by the evidence, that any of their examinations
commenced after July 22, 1998.
                               - 51 -

     Although petitioners argue they supplied their return

preparer, John Zahar (Mr. Zahar), with all relevant information to

determine their tax liabilities and that they reasonably relied in

good faith on his determinations, the record suggests otherwise.

     The record is insufficient to establish Mr. Zahar’s knowledge

of income tax law or that petitioners had reason to believe he was

competent.   Mr. Zahar had been a social acquaintance of Fuad and

the Mahmoud Daya family for the past 14 or 15 years.   Petitioners

provided no evidence that they had Mr. Zahar prepare their returns

because of his knowledge of income tax law.   Although Mr. Zahar

testified that he had been in the business of preparing tax

returns for the last 12 years, he offered no further testimony

regarding the nature of his business or his qualifications to

prepare income tax returns.

     Petitioners also have failed to establish they provided Mr.

Zahar with all relevant information to determine their filing

status and their entitlement to the deductions at issue.   Mr

Zahar’s testimony at times was vague and somewhat contradictory.

He testified he was not aware that petitioners did not hold legal

title to the Foster City residence in 1995, but then he testified

that he advised them to gain legal title in 1996.   He indicated

that his understanding of the law was that in order to take

deductions with respect to a residence, a taxpayer must hold legal

title to the residence.   Petitioners, thus, could not have relied
                                 - 52 -

on Mr. Zahar’s advice in claiming deductions for mortgage interest

and property taxes in 1995.

     Gabriel testified that he provided Mr. Zahar with information

about his income and told him that he and his brother were paying

for “the house and the mortgage, and all the taxes and all the

expenses.   Food, drink, electricity.”      Mr. Zahar testified that he

believed Gabriel and Morhaf were supporting the Mahmoud Daya

family during the years at issue and that Fuad provided additional

money to the family from “time to time”.       There is no evidence,

however, that petitioners informed Mr. Zahar of the extent of

Fuad’s contributions to the family.       Yet out of a total of

$32,531.88 deposited into the household account in 1995, Fuad

contributed at least $18,500.    Without such information, Mr. Zahar

could not have determined petitioners’ entitlement to the

deductions at issue and to head of household filing status.

     Under these circumstances, petitioners have not shown they

had reasonable cause for their underpayment of taxes or acted in

good faith.   Accordingly, we uphold respondent’s determinations

that petitioners are liable for additions to tax under section

6662(a).

     We have considered all other arguments advanced by

petitioners, and to the extent not discussed above, have found

those arguments to be irrelevant or without merit.

     To reflect the foregoing,

                                             Decisions will be entered

                                      for respondent.
