                         T.C. Memo. 2000-175



                       UNITED STATES TAX COURT



         ROBERT E. SIGNOM, II AND LOLA SIGNOM, Petitioners v.
             COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 14764-98.                        Filed May 26, 2000.



     Mark S. Feuer, for petitioners.

     Stephen J. Neubeck, for respondent.



               MEMORANDUM FINDINGS OF FACT AND OPINION


     CHIECHI, Judge:    Respondent determined for 1991 a deficiency

in, an addition under section 6651(a)(1)1 to, and an accuracy-

related penalty under section 6662(a) on petitioners’ Federal

income tax (tax) in the amounts of $51,576, $12,894, and $10,315,

     1
      All section references are to the Internal Revenue Code in
effect for the year at issue. All Rule references are to the Tax
Court Rules of Practice and Procedure.
                                 - 2 -

respectively.

        The issues remaining for decision for the year at issue

are:2

        (1) Are petitioners entitled to a deduction under section

170(a) for a claimed noncash charitable contribution?     We hold

that they are not.

        (2) Are petitioners liable for the accuracy-related penalty

under section 6662(a)?     We hold that they are.

                           FINDINGS OF FACT

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

        Petitioners resided in Dayton, Ohio (Dayton), at the time

the petition was filed.

        Petitioner Robert E. Signom, II (Mr. Signom) received an

undergraduate degree in business administration in 1967 from

Miami University of Ohio.     Thereafter, he attended law school,

having matriculated for two years at Washington University in St.

Louis and for one year at Ohio State University, from which he

received a law degree in 1970.     Petitioner Lola Signom (Ms.

Signom) received an undergraduate degree in journalism from Ohio

University.


        2
      Petitioners conceded certain determinations in the notice
of deficiency (notice) and did not present evidence at trial or
make any argument on brief with respect to certain other determi-
nations in the notice. We conclude that petitioners have aban-
doned contesting those determinations in the notice as to which
they presented no evidence at trial or make no argument on brief.
See Rybak v. Commissioner, 91 T.C. 524, 566 n.19 (1988).
                               - 3 -

     Mr. Signom began practicing law in 1971.   During the year at

issue, he practiced law both as a partner with the law firm of

Young, Pryor, Lynn & Jerardi and as a sole practitioner.   At all

relevant times, Mr. Signom, a collector of Packard automobiles,

also operated a sole proprietorship that restored automobiles,

and Ms. Signom was employed by NCR Corporation.

     As of the time of the trial in this case, Mr. Signom served

in a variety of positions for certain organizations, including as

a trustee of the Wright State University Foundation, general

counsel of the Hipple Cancer Research Laboratory, a member of the

executive committee of the Miami Valley Council of the Boy Scouts

of America, and a trustee of a museum devoted to Packard automo-

biles that he founded in Dayton (Packard museum).   Mr. Signom had

also served prior to the time of the trial in this case as a

trustee and general counsel of the Miami Valley School located in

Dayton.   As of the time of that trial, Ms. Signom was involved

with a number of organizations, including Westminster Presbyte-

rian Church, the National Conference for Community and Justice,

the Ohio University Development Foundation, and a hate crimes

task force in Dayton.

     Since 1975 to the time of the trial in this case, Mr. Signom

owned interests in approximately 20 residential and commercial

rental properties.   Mr. Signom purchased one of those properties,

which was located at 517 Irving Avenue, Dayton (Irving property),

around 1976.   That property contained a 6,600 square-foot build-
                                - 4 -

ing, which served as commercial storage garages.

     On July 10, 1984, Marvin A. Mumma (Mr. Mumma) agreed to

lease certain property that he owned, which was located on North

St. Clair Street, Dayton (St. Clair property), to Mr. Signom and

Malcom W. MacLeod (Mr. MacLeod) (Mumma/Signom/MacLeod lease).

The Mumma/Signom/MacLeod lease was for a one-year term that

commenced on August 15, 1984.   If certain conditions stated in

that lease were satisfied, it was automatically renewable for a

total of four additional years.

     On March 16, 1987, after Mr. MacLeod moved away from Dayton,

Mr. Mumma and MHR Properties, which at all relevant times was an

Ohio general partnership in which both Mr. Signom and Ms. Signom

were equal general partners, entered into a written lease agree-

ment with respect to the St. Clair property.    (We shall refer to

that written lease agreement as the Mumma/MHR Properties lease

agreement.)   Pursuant to the Mumma/MHR Properties lease agree-

ment, Mr. Mumma agreed to lease the St. Clair property to MHR

Properties for a 10-year term that commenced on March 1, 1987, in

return for monthly rental payments of $1,000.   (We shall refer to

MHR Properties’ right under the Mumma/MHR Properties lease

agreement to lease the St. Clair property as MHR Properties’

leasehold interest.)   The Mumma/MHR Properties lease agreement

did not permit MHR Properties, the lessee, to terminate MHR

Properties’ leasehold interest unilaterally.

     Pursuant to the Mumma/MHR Properties lease agreement, Mr.
                                - 5 -

Mumma also agreed to give MHR Properties an option to purchase

the St. Clair property.   In this regard, that agreement provided:

     ARTICLE 19.   PURCHASE OPTION

          The parties agree that the present value of the
     property is $135,000. During the term of this Lease
     Tenant shall have the right to, at its sole option,
     purchase the property from Landlord for $135,000, which
     price shall be reduced by one-half (½) of all rents
     paid by Tenant to Landlord from the inception of this
     Lease to the time of purchase.

(We shall refer to the purchase option granted by Mr. Mumma to

MHR Properties in the Mumma/MHR Properties lease agreement as MHR

Properties’ purchase option.)   After MHR Properties paid the July

1991 rent due under the Mumma/MHR Properties lease agreement, it

could have exercised MHR Properties’ purchase option for

$108,500, which was calculated under that lease agreement by

reducing $135,000 (the value according to the Mumma/MHR Proper-

ties lease agreement of the St. Clair property as of March 16,

1987) by $26,500 (one-half of the rental payments through July

1991 that MHR Properties had made to Mr. Mumma under that lease

agreement).   (We shall sometimes refer collectively to MHR

Properties’ leasehold interest and MHR Properties’ purchase

option as MHR Properties’ St. Clair property interests.)

     Sometime after Mr. Mumma and MHR Properties entered into the

Mumma/MHR Properties lease agreement, Mr. Mumma died.   On May 23,

1988, Mr. Mumma’s widow, Retha Mumma (Ms. Mumma), transferred by

quitclaim deed the St. Clair property, which was subject to the

Mumma/MHR Properties lease agreement, to the University of Dayton
                               - 6 -

(the University), an Ohio not-for-profit corporation.    (We shall

sometimes refer to the St. Clair property as encumbered by MHR

Properties’ St. Clair property interests as the encumbered St.

Clair property.)   Although the University accepted the gift of

the encumbered St. Clair property from Ms. Mumma, the University

desired to dispose of that property.   That was because at the

time Ms. Mumma transferred the encumbered St. Clair property to

the University, that property was not contiguous to the Univer-

sity, and it was the University’s general practice at that time

to own only those real properties that were contiguous to it.

     The University believed that it would be unable to dispose

of the encumbered St. Clair property as long as MHR Properties’

St. Clair property interests remained in effect.    Consequently,

in 1988, shortly after having received the encumbered St. Clair

property from Ms. Mumma, the University contacted Mr. Richard

Packard (Mr. Packard).   Mr. Packard was a partner with the law

firm of Porter, Wright, Morris & Arthur, who served as outside

counsel for the University and who knew Mr. Signom, since they

had worked together in the past and Mr. Packard had previously

solicited Mr. Signom to become a substantial benefactor of the

University, which Mr. Signom declined to do.    The University

asked Mr. Packard, who was not an officer of the University, as

well as certain of its Board members and officers, to represent

the University in dealing with Mr. Signom regarding its desire to

dispose of the encumbered St. Clair property.    (We shall refer to
                               - 7 -

the various individuals who represented the University with

respect to its desire to dispose of the encumbered St. Clair

property as representatives of the University.)

     In their dealings with Mr. Signom regarding the University’s

desire to dispose of the encumbered St. Clair property, the

representatives of the University asked Mr. Signom to consider,

inter alia, the following proposals:   (1) Sale by the University

to Mr. Signom of its fee interest in that property, (2) purchase

by the University of MHR Properties’ St. Clair property inter-

ests, or (3) gift to the University of MHR Properties’ St. Clair

property interests.   Mr. Signom advised the representatives of

the University that he was willing to consider the foregoing

proposals, but that he had to discuss those proposals with Ms.

Signom and obtain her agreement in order to effect any such

proposal because MHR Properties, a partnership in which he and

Ms. Signom were equal general partners, held MHR Properties’ St.

Clair property interests.

     No agreement was reached during the period 1988-1990 between

the University and petitioners on how to accomplish the Univer-

sity’s goal of disposing of the encumbered St. Clair property.

Nonetheless, the representatives of the University continued to

explore with Mr. Signom and others, including an attorney named

Marvin Felman (Mr. Felman), how to accomplish that objective.

     Sometime prior to May 1991, certain representatives of the

University and Mr. Signom became aware that Mr. Felman had a
                                 - 8 -

longstanding interest in acquiring the St. Clair property.    That

was because Mr. Felman owned a number of other real properties

that were contiguous to that property, and he desired to combine

the real properties that he already owned with the St. Clair

property in order to create one large real estate tract.

     Sometime prior to May 1991, certain representatives of the

University and Mr. Felman became aware that Mr. Signom owned the

Irving property, and Mr. Felman and Mr. Signom became aware that

the University was interested in acquiring that property.    The

University was interested in acquiring the Irving property

because it believed that the storage garages located thereon

would satisfy its need for storage facilities in the neighborhood

surrounding that property and because the University had identi-

fied the Irving property, as well as certain other real proper-

ties surrounding the University’s campus, as properties that it

wished to acquire as part of the University’s long-range develop-

ment plan.

     Sometime prior to May 1991, certain representatives of the

University and Mr. Felman also became aware that Mr. Signom had

an interest in acquiring certain real property located at 420

South Ludlow Street, Dayton (Ludlow property), which was the

current site of the Packard museum and the former site of a

Packard automobile dealership.

     Sometime prior to May 1991, Mr. Packard on behalf of the

University, Mr. Signom, and Mr. Felman became the architects of a
                              - 9 -

proposed exchange transaction among the University, Mr. Signom,

and Mr. Felman (proposed exchange transaction), whereby (1) the

University would accomplish its objectives of disposing of the

St. Clair property and acquiring the Irving property; (2) Mr.

Signom would accomplish his objective of acquiring the Ludlow

property; and (3) Mr. Felman would accomplish his objective of

acquiring the St. Clair property.   Each of the parties to the

proposed exchange transaction had a specific condition or prefer-

ence regarding how best to achieve such party’s objective of

acquiring and/or disposing of a particular real property, which

the representatives of the University, Mr. Signom, and Mr. Felman

made known during the negotiations regarding that transaction.

     The University indicated during the negotiations regarding

the proposed exchange transaction that it wanted to place certain

deed restrictions on the Ludlow property.   That was because it

wanted to ensure that that property was not used for any purpose

which was incompatible with the purposes of (1) the University, a

Catholic university operated by the Marist religious order, and

(2) Chaminade-Julienne High School, a Catholic high school also

operated by the Marist religious order, that was closely aligned

with the University and was located directly across the street

from it.

     Mr. Signom indicated during the negotiations regarding the

proposed exchange transaction that he wanted to treat the pro-

posed termination of MHR Properties’ St. Clair property interests
                              - 10 -

as a gift to the University for tax purposes.

     Mr. Felman made it known during the negotiations regarding

the proposed exchange transaction that he was unwilling to

purchase the St. Clair property unless MHR Properties’ purchase

option with respect to that property was extinguished.   Mr.

Felman further stated during those negotiations that he preferred

that MHR Properties’ leasehold interest with respect to the St.

Clair property be terminated before he purchased that property.

However, Mr. Felman indicated that if no agreement regarding

cancellation of that leasehold interest could be reached, he

would attempt to negotiate an agreement with Mr. Signom regard-

ing, inter alia, the length of the lease term under the Mumma/MHR

Properties lease agreement.

     By around May 1991, the University, Mr. Signom, and Mr.

Felman reached a tentative agreement on the following basic

structure of the proposed exchange transaction (tentative ex-

change transaction) that would enable them to accomplish their

respective objectives:   (1) The termination of MHR Properties’

St. Clair property interests by mutual agreement of the Univer-

sity and Mr. Signom and Ms. Signom as the general partners of MHR

Properties and the transfer by the University to, and the pur-

chase by, Mr. Felman of the St. Clair property unencumbered by

those property interests; (2) the transfer by Mr. Signom to the

University of the Irving property subject to the existing mort-

gage on that property; and (3) the acquisition by the University
                             - 11 -

of the Ludlow property and the transfer by the University to Mr.

Signom of that property subject to deed restrictions placed

thereon by the University.

     In anticipation of finalizing and thereafter closing the

tentative exchange transaction and in order to facilitate the

acquisition by the University of the Ludlow property and its

transfer by the University to Mr. Signom at that closing, Mr.

Felman, who had no interest in acquiring the Ludlow property,

signed a contract dated May 7, 1991, that he did not negotiate

under which he offered to purchase that property from EDR Associ-

ates (EDR) (May 7 Ludlow contract).   Pursuant to the May 7 Ludlow

contract, Mr. Felman offered to purchase the Ludlow property for

$253,000 and made a $5,000-earnest money deposit.   Consistent

with the tentative exchange transaction to which the University,

Mr. Signom, and Mr. Felman had tentatively agreed (i.e., the

University, and not Mr. Felman, would acquire the Ludlow property

and transfer it to Mr. Signom), the May 7 Ludlow contract pro-

vided that, upon its closing, the deed transferring the Ludlow

property was to be made to “H. MARVIN FELMAN OR HIS NOMINEE”.

Although Mr. Felman’s offer under the May 7 Ludlow contract was

to remain open only until May 10, 1991, EDR made a counteroffer

to the May 7 Ludlow contract that was signed by a representative

of EDR on June 4, 1991 (June 4 Ludlow counteroffer).3   On June

     3
      The modifications to the May 7 Ludlow contract contained in
                                                   (continued...)
                               - 12 -

21, 1991, Mr. Felman accepted the June 4 Ludlow counteroffer.

(We shall refer to the contract that Mr. Felman and EDR entered

into for the purchase of the Ludlow property from EDR as the

Ludlow property purchase contract.)

     In anticipation of finalizing and thereafter closing the

tentative exchange transaction, by letter dated July 6, 1991

(July 6 letter), Mr. Signom sent Mr. Packard a document entitled

“DEED OF GIFT”, which also was dated July 6, 1991 (July 6 docu-

ment).   The July 6 letter stated in pertinent part:

                      In re: Donation to University of Dayton

     Dear Dick:

          In our recent conversation about the above refer-
     enced matter, you suggested that I execute a “Deed of
     Gift” to the University covering my Purchase Option on
     the St. Clair Street property, effective immediately.

          Enclosed herewith, please find that Deed of Gift.
     It is my understanding that, if it meets with your
     approval, you will forward it to your client; if it
     does not, you will contact me with all deliberate speed
     with your suggested modifications.

The July 6 document, which related only to MHR Properties’

purchase option and not to MHR Properties’ leasehold interest,

stated in pertinent part:

                            DEED OF GIFT

     3
      (...continued)
the June 4 Ludlow counteroffer are not material to a resolution
of the issue presented in this case under sec. 170.

     For reasons not disclosed by the record, the June 4 Ludlow
counteroffer was signed again by a representative of EDR on June
19, 1991.
                              - 13 -

                Comes now Robert E. Signom II, residing at
     1350 Creighton Avenue, City of Dayton, County of Mont-
     gomery, State of Ohio, and hereby makes a gift of the
     following:

               The Purchase Option contained in Article 19
          of that certain Agreement of Lease, by and between
          Marvin Mumma and MHR Properties, dated March 16,
          1987, regarding the building located at 15-23
          North St. Clair Street, City of Dayton, County of
          Montgomery, State of Ohio, and being Part Lot
          Number 140 of the revised plat of the City of
          Dayton.

     to THE UNIVERSITY OF DAYTON, 300 College Park Avenue,
     City of Dayton, County of Montgomery, State of Ohio, as
     of this 6th day of July, 1991.

     Mr. Signom was aware, and indeed had informed the represen-

tatives of the University in 1988, that he had to obtain the

agreement of Ms. Signom in order to effect any proposal with

respect to MHR Properties’ leasehold interest or MHR Properties’

purchase option.   Nonetheless, the July 6 document stated that

Mr. Signom, instead of MHR Properties and/or Mr. Signom and Ms.

Signom as the equal general partners of that partnership, was the

grantor to the University of MHR Properties’ purchase option.     In

addition, Mr. Signom signed the July 6 document in his individual

capacity and not as a general partner or otherwise as a represen-

tative of MHR Properties.   The signature of Ms. Signom does not

appear on the July 6 document.   No other individual signed the

July 6 document as a representative of MHR Properties.   Although

Mr. Signom sent the July 6 document to Mr. Packard, it was not

sent to the University and was never recorded.

     In anticipation of finalizing and thereafter closing the
                             - 14 -

tentative exchange transaction, on July 12, 1991, Mr. Signom sent

a number of documents relating to that transaction by facsimile

transmission to William Deas (Mr. Deas), an attorney at Porter,

Wright, Morris & Arthur who was experienced in real estate

matters and who was working with Mr. Packard on behalf of the

University with respect to that transaction.   Those documents

consisted of a copy of a mortgage dated November 4, 1978, in an

amount not exceeding $59,600 that secured the Irving property

(Irving property mortgage), a partial release of that mortgage

dated January 2, 1981, a site plan of the Irving property, and a

draft of an agreement relating to the tentative exchange transac-

tion (draft property exchange agreement).

     The draft property exchange agreement provided in pertinent

part:

           THIS AGREEMENT, by and among the University of
     Dayton (“UNIVERSITY”) * * *; H. Marvin Felman
     (“FELMAN”) * * *; and Robert E. Signom II, and/or
     Robert E. Signom II dba MHR Properties * * * (collec-
     tively “SIGNOM”), entered into this ______ day of July,
     1991.

          WHEREAS, the UNIVERSITY is desirous of acquiring
     certain real property, commonly known as 517 Irving
     Avenue (rear), Dayton, * * * (“Irving”) which is pres-
     ently owned by SIGNOM, and

          WHEREAS, FELMAN is desirous of acquiring certain
     real property, commonly known as 17-25 North St. Clair
     Street, Dayton, * * * (“St. Clair”) which is presently
     owned by the UNIVERSITY, and leased to SIGNOM, and
     SIGNOM having an option to purchase said property as
     set out in said lease, and

          WHEREAS, SIGNOM is desirous of acquiring certain
     real property, commonly known as 420 South Ludlow
                        - 15 -

Street * * * Dayton * * * (“Ludlow”) which is presently
under a contract to purchase by FELMAN.

     NOW THEREFORE, in consideration of the mutual
promises and covenants contained herein, the parties
agree as follows:

     1.   At a closing to be held on or before July __
1991, at the office of ______________, the parties
hereto shall execute the following transfers:

          A. FELMAN shall purchase the St. Clair prop-
          erty from the UNIVERSITY for the sum of * * *
          $220,000.00 * * * and the UNIVERSITY shall
          then transfer to FELMAN, or his designee, by
          Limited Warranty Deed, the St. Clair prop-
          erty. A cancellation of lease and cancella-
          tion of option to purchase shall be executed
          by SIGNOM and he shall obtain signatures from
          his wife and the partnership which has inter-
          est in said property on said document. Fur-
          thermore, SIGNOM shall assign said tenants in
          possession’s leases to FELMAN.

          B. FELMAN shall assign his contract to pur-
          chase the Ludlow Street property to the UNI-
          VERSITY. UNIVERSITY shall then complete the
          acquisition of said Ludlow Street property
          and transfer the same to SIGNOM, by General
          Warranty Deed together with a cash payment of
          * * * $10,500.00 * * * plus an amount equal
          to one-half * * * any and all payments made
          by SIGNOM to the UNIVERSITY with regard to
          the St. Clair property, from May 1, 1991, to
          and including the date of said closing. The
          UNIVERSITY shall refund FELMAN’s earnest
          money deposit for the Ludlow Street property
          in the amount of * * * $5,000 * * *.

          C. SIGNOM shall transfer to the UNIVERSITY,
          by General Warranty Deed, the Irving Street
          property, subject to the existing mortgage in
          favor of NBD in the amount of approximately
          * * * $31,564.01 * * *. The UNIVERSITY shall
          refund to Signom at closing any amount by
          which that principal balance has been reduced
          from May 1, 1991 to and including the date of
          closing.
                               - 16 -

          2.   All such transfers shall be made with a
     proration of real property taxes through and including
     the date of closing. The transferor shall pay the
     county transfer tax of $2.00 per thousand on the sale
     price. * * *

        *       *       *        *      *       *       *

          5.   Each transferor shall prepare, subject to the
     approval of the transferee, the documents of title for
     each transfer.

        *       *       *        *      *       *       *

          7.   Each transferee shall receive possession at
     closing, subject only to tenants’ rights, if any.

          8.   During Signom’s ownership of the Ludlow
     property, the University reserves and restricts the use
     of the Ludlow property prohibiting the use thereof for
     (1) the sale and/or distribution of pornographic mate-
     rials; (2) nude and semi-nude entertainment; (3) abor-
     tion services; and/or (4) any other purpose reasonably
     found offensive by the University, and reasonably based
     upon its character as a Catholic-sponsored institution
     of higher education. In the event the Grantee violates
     the foregoing restrictions, the University may reac-
     quire the Ludlow property at two (2) time[s] its then
     appraised value.

          These reservations and restrictions shall termi-
     nate and be of no force and effect upon the sale or
     exchange of the Ludlow property by Signom.

Certain changes not material to a resolution of the issue pre-

sented in this case under section 170 were made to the draft

proposed property exchange agreement before it was finalized and

signed (1) on August 1, 1991, by Mr. Deas on behalf of the

University and by Mr. Signom and by Mr. Felman and (2) a few days

thereafter by Brother Bernard J. Ploeger, S.M. (Brother Ploeger),

the Senior Vice President for Administration of the University,

on behalf of the University.
                                - 17 -

     In anticipation of finalizing and thereafter closing the

draft property exchange agreement, on July 22, 1991, Brother

Ploeger signed (1) a limited warranty deed conveying the St.

Clair property to Mr. Felman (July 22 St. Clair deed), (2) a

limited warranty deed conveying the Ludlow property to Mr. Signom

(July 22 Ludlow deed), and (3) a document entitled “CANCELLATION

OF LEASE and OPTION TO PURCHASE” (July 22 document).     After

Brother Ploeger signed the foregoing documents, the University

sent them to Mr. Packard and Mr. Deas to be held in their custody

and to be used only in the event that the parties to the draft

property exchange agreement finalized and thereafter closed that

agreement.    As of July 22, 1991, when Brother Ploeger signed the

July 22 St. Clair deed, the July 22 Ludlow deed, and the July 22

document, the parties to the draft property exchange agreement

anticipated that the various transactions provided for by that

agreement would close on July 31, 1991 (July 31 anticipated

closing), the date on which the Ludlow property purchase contract

stated the closing for delivery of the deed for the Ludlow

property and the payment of the balance of the purchase price for

that property (collectively, closing of the purchase of the

Ludlow property) were to take place.

     The July 22 document that Brother Ploeger signed provided in

pertinent part:

          THIS INDENTURE, made this 22 day of July, 1991.

             WHEREAS, it is mutually beneficial for the Univer-
                             - 18 -

     sity of Dayton, successor lessor to Marvin Mumma,
     Deceased, hereinafter referred to [as] Party of the 1st
     Part, and the Lessee, MHR, an Ohio General Partnership,
     and Robert Signom, married and General Partner, and his
     wife, Lola A. Signom, General Partner, being all of the
     partners of the MHR Partnership, hereinafter referred
     to [as] Party of [the] 2nd Part, to cancel an Agreement
     of Lease and Option to Purchase executed on the 16th
     day of March, 1987 between Party of the 1st Part and
     the Parties of the Second Part as per “Exhibit A”
     recorded at Microfiche No. 87-0548A01 of the Mortgage
     Records of Montgomery County, Ohio.

        *       *       *       *         *     *       *

          WITNESSETH, that on the date hereof each of the
     parties has paid to the other the sum of ONE HUNDRED
     DOLLARS ($100.00) and each of them has cancelled,
     voided and delivered up to [sic] the agreement to lease
     and option to purchase as per “Exhibit A” which has
     been declared null and void and of no other effect.

At all relevant times, including when Brother Ploeger signed the

July 22 document, the University was not known to have sued in

order to enforce a promised gift to it.

     The University, Mr. Signom, and Ms. Signom all anticipated

that Mr. Signom and Ms. Signom would sign the July 22 document on

behalf of MHR Properties at the July 31 anticipated closing.

However, shortly after Brother Ploeger signed the July 22 docu-

ment and sent it, along with the July 22 St. Clair deed and the

July 22 Ludlow deed that he also signed on July 22, 1991, to Mr.

Packard and Mr. Deas to be used in the event the draft property

exchange agreement was finalized and a closing thereunder took

place, Mr. Signom informed Mr. Deas that Ms. Signom would be

unable to attend the July 31 anticipated closing.   At Mr.

Signom’s request, Mr. Deas mailed the July 22 document to Mr.
                               - 19 -

Signom in order to have Ms. Signom sign it prior to that antici-

pated closing.   Mr. Deas expected Mr. Signom to have that docu-

ment signed by Ms. Signom and to bring it with him to the July 31

anticipated closing.   On July 26, 1991, both Mr. Signom and Ms.

Signom signed the July 22 document.

     On August 1, 1991, the parties to the draft property ex-

change agreement finalized the terms of that agreement when Mr.

Signom, Mr. Felman, and Mr. Deas as the University’s representa-

tive signed a document (final property exchange agreement) that

set forth the final terms of the various transactions that they

agreed would take place under that agreement (final exchange

transaction).    The closing of the final exchange transaction, as

well as the closing of the purchase of the Ludlow property, took

place on August 1, 1991 (August 1 closing), instead of on July

31, 1991, as originally contemplated.    Mr. Signom and Mr. Felman

attended the August 1 closing, as did Mr. Deas as the Univer-

sity’s representative.   The July 22 document, as signed by

Brother Ploeger on behalf of the University on July 22, 1991, and

by petitioners as the general partners of MHR Properties on July

26, 1991, was delivered at the August 1 closing.    Brother Ploeger

executed the final property exchange agreement on behalf of the

University a few days after the August 1 closing.

     As pertinent here, the terms of the final property exchange

agreement were identical to the terms of the draft property

exchange agreement.    The final property exchange agreement
                               - 20 -

provided in pertinent part:

                              AGREEMENT

           THIS AGREEMENT, by and among the University of
     Dayton (“UNIVERSITY”) * * *; H. Marvin Felman
     (“FELMAN”) * * *; and Robert E. Signom II, and/or
     Robert E. Signom II dba MHR Properties * * * (collec-
     tively “SIGNOM”), entered into this 1st day of August,
     1991.

          WHEREAS, the UNIVERSITY is desirous of acquiring
     certain real property, commonly known as 517 Irving
     Avenue (rear), Dayton * * * (“Irving”) which is pres-
     ently owned by SIGNOM, and

          WHEREAS, FELMAN is desirous of acquiring certain
     real property, commonly known as 17-25 North St. Clair
     Street, Dayton * * * (“St. Clair”) which is presently
     owned by the UNIVERSITY, and leased to SIGNOM, and
     SIGNOM having an option to purchase said property as
     set out in said lease, and

          WHEREAS, SIGNOM is desirous of acquiring certain
     real property, commonly known as 420 South Ludlow
     Street and/or 41 Franklin Street, Dayton * * * (“Lud-
     low”) which is presently under a contract to purchase
     by FELMAN.

          NOW THEREFORE, in consideration of the mutual
     promises and covenants contained herein, the parties
     agree as follows:

          1.    At a closing to be held on or before August
     1st, 1991, at the office of Lawyers Title Insurance
     Company, the parties hereto shall execute the following
     transfers:

               A.   FELMAN shall purchase the St. Clair
               property from the UNIVERSITY for the sum of
               * * * $220,000.00 * * * and the UNIVERSITY
               shall then transfer to FELMAN, or his
               designee, by Limited Warranty Deed, the St.
               Clair property. A cancellation of lease and
               cancellation of option to purchase shall be
               executed by SIGNOM and he shall obtain signa-
               tures from his wife and the partnership which
               has interest in said property on said docu-
               ment. Furthermore, SIGNOM shall assign sub-
                        - 21 -

          tenants in possession’s leases to FELMAN.

          B.   FELMAN shall assign his contract to
          purchase the Ludlow Street property to the
          UNIVERSITY. UNIVERSITY shall then complete
          the acquisition of said Ludlow Street prop-
          erty and shall exchange the same with SIGNOM,
          by Limited Warranty Deed for the Irving
          Street property together with a cash payment
          of * * * $10,500.00 * * *, plus an amount
          equal to one-half * * * any and all payments
          made by SIGNOM to the UNIVERSITY with regard
          to the St. Clair property, from May 1, 1991,
          to an[d] including the date of said closing.
          The UNIVERSITY shall refund FELMAN’s earnest
          money deposit for the Ludlow Street property
          in the amount of * * * $5,000 * * *.

          C.   SIGNOM shall transfer to the UNIVERSITY,
          by General Warranty Deed, the Irving Street
          property, subject to the existing mortgage in
          favor of NBD in the amount of approximately
          * * * $31,515.96 * * *. The UNIVERSITY shall
          refund to SIGNOM at closing any amount by
          which that principal balance has been reduced
          from May 1, 1991 to and including the date of
          closing.

     2.   All such transfers shall be made with a proration
of real property taxes through and including the date of
closing. The transferor shall pay the county transfer tax
of $2.00 per thousand on the sale price. * * *

     *      *      *      *      *      *      *

     5.   Each transferor shall prepare, subject to the
approval of the transferee, the documents of title for
each transfer.

     *      *      *      *      *      *     *

     7.   Each transferee shall receive possession at clos-
ing, subject only to tenants’ rights, if any.

     8.   During SIGNOM’s ownership of the Ludlow property,
the UNIVERSITY reserves and restricts the use of the Ludlow
property prohibiting the use thereof for (1) the sale and/or
distribution of pornographic materials; (2) nude and semi-
nude entertainment; (3) abortion services; and/or (4) any
                             - 22 -

     other purpose reasonably found offensive by the UNIVERSITY,
     and reasonably based upon its character as a Catholic-spon-
     sored institution of higher education. In the event Signom
     violates the foregoing restrictions designated as restric-
     tions (1), (2) or (3), the University may reacquire the
     Property at its then appraised value. In the event Signom
     violates the foregoing restriction designated as restriction
     (4), the University may reacquire the Property at two times
     its then appraised value. Said appraisal to be based upon
     the highest and best use of the Property regardless of such
     restrictions.

     The parties to the final property exchange agreement in-

tended for (1) the July 22 St. Clair deed to satisfy the require-

ment in the final property exchange agreement that “the UNIVER-

SITY shall * * * transfer to FELMAN * * * by Limited Warranty

Deed, the St. Clair property”; (2) the July 22 Ludlow deed to

satisfy the requirement in the final property exchange agreement

that the “UNIVERSITY * * * shall exchange * * * [the Ludlow

property], by Limited Warranty Deed for the Irving Street prop-

erty”; and (3) the July 22 document to satisfy the requirement in

the final property exchange agreement that “A cancellation of

lease and cancellation of option to purchase shall be executed by

SIGNOM and he shall obtain signatures from his wife and the

partnership which has interest in said property on said docu-

ment”.

     Pursuant to the final property exchange agreement, as of

August 1, 1991, (1) (a) MHR Properties, Mr. Signom and Ms.

Signom, as the general partners of MHR Properties, and the

University canceled, by delivery of the July 22 document that

they had signed shortly before the August 1 closing, the
                             - 23 -

Mumma/MHR Properties lease agreement, including MHR Properties’

purchase option contained in that agreement, (b) Mr. Felman

purchased from the University the unencumbered St. Clair prop-

erty, which had a value as of that date of $220,000 as set forth

in the final property exchange agreement, and (c) the University

conveyed that property to Mr. Felman by delivery of the July 22

St. Clair deed that the University had signed shortly before the

August 1 closing; (2) (a) the University purchased from EDR the

Ludlow property,4 which had a value as of that date of $253,000

as set forth in the final property exchange agreement, and

(b) the University conveyed that property to Mr. Signom by

delivery of the July 22 Ludlow deed that the University had

signed shortly before the August 1 closing; and (3) (a) Mr.

Signom conveyed the Irving property subject to the Irving prop-

erty mortgage, which had a $30,963 balance due as of that date,

to the University by general warranty deed (Irving deed), and

(b) the University paid Mr. Signom $12,000 in cash.5   (We shall

refer to the transfers of properties and other consideration that

were effected on August 1, 1991, among the University, Mr.

Felman, and Mr. Signom as the August 1 property transfers.)   The


     4
      The parties to the Ludlow property purchase contract had
agreed to extend the date of closing of the purchase of the
Ludlow property from July 31, 1991, to Aug. 1, 1991.
     5
      The value of the Irving property that Mr. Signom trans-
ferred to the University pursuant to the final property exchange
agreement on Aug. 1, 1991, was not set forth in that agreement.
                             - 24 -

University thus transferred to Mr. Signom as part of the August 1

property transfers a total of $295,963 consisting of property

(the Ludlow property valued at $253,000 and $12,000 cash) and

other consideration (relief from the mortgage of $30,963 to which

the Irving property was subject on August 1, 1991, when Mr.

Signom transferred it to the University).

     On August 6, 1991, the Irving deed, the July 22 Ludlow deed,

the July 22 St. Clair deed, and the July 22 document were re-

corded in Montgomery County, Ohio (Montgomery County).    In order

to record those three deeds, the respective grantors or

transferors of the real properties to which those deeds pertained

and which were conveyed pursuant to the final property exchange

agreement were required to pay (1) a real property transfer tax

imposed by Montgomery County with respect to the respective

transfers of those properties that in this case was equal to $1

for each $1,000 of the respective values of those properties, see

Ohio Rev. Code Ann. sec. 322.02 (Anderson 1998); Montgomery

County, Ohio, Resolution 80-2479 (Dec. 30, 1980); and (2) a fee

imposed by Montgomery County with respect to the respective

transfers of those properties that in this case was equal to $1

for each $1,000 of those respective values, see Ohio Rev. Code

Ann. sec. 319.202(C) and 319.54(F)(3) (Anderson 1998).    (We shall

refer collectively to that tax and fee as the Ohio transfer tax.)

At all relevant times, under the law of the State of Ohio, the

grantee or transferee of real property was required to declare
                              - 25 -

the value of real property transferred in order to calculate the

Ohio transfer tax.   See Ohio Rev. Code Ann. sec. 319.202 (Ander-

son 1998).   The Ohio transfer tax imposed on the University with

respect to its conveyance to Mr. Signom of the Ludlow property

was $506, which means that Mr. Signom, as the grantee or trans-

feree of that property, declared its value to be $253,000.    The

Ohio transfer tax imposed on the University with respect to its

conveyance to Mr. Felman of the St. Clair property was $440,

which means that Mr. Felman, as the grantee or transferee of that

property, declared its value to be $220,000.   The Ohio transfer

tax imposed on Mr. Signom with respect to his conveyance to the

University of the Irving property was $330, which means that the

University, as the grantee or transferee of that property,

declared its value to be $165,000.

     Petitioners anticipated that Mr. Signom would receive quid

pro quo from the University at the closing of the final exchange

transaction on August 1, 1991.   Under the final property exchange

agreement, Mr. Signom was entitled to receive quid pro quo from

the University in the final exchange transaction, and pursuant to

that agreement he did receive such quid pro quo in that transac-

tion.

     On August 15, 1991, Mr. Deas sent a letter to Mr. Signom

which transmitted to Mr. Signom for his review and approval a

draft of a document entitled “AGREEMENT FOR CANCELLATION OF

LEASE” (August 15 draft acknowledgment).   The August 15 draft
                                - 26 -

acknowledgment provided in pertinent part:

          This Agreement made effective as of August 1,
     1991, by and between the University of Dayton, an Ohio
     corporation not-for-profit (“Landlord”), and MHR Prop-
     erties, an Ohio general partnership, Robert E. Signom
     II and Lola A. Signom, Husband and Wife (collectively,
     the “Tenant”).

          WHEREAS, Marvin Mumma, as landlord, and MHR Prop-
     erty, as tenant, entered into a lease dated March 16,
     1987, for the premises located at 15-23 N. St. Clair
     Street, Dayton, Ohio, which is more particularly de-
     scribed on Exhibit “A” attached hereto and made a part
     hereof, and is recorded at Microfiche No. 87-0548 A01
     of the Mortgage Records for Montgomery County, Ohio
     (“Lease”); and

          WHEREAS, the University of Dayton is the
     successor-in-interest to the interest of Marvin Mumma,
     as landlord, having acquired same pursuant to a deed
     recorded at Microfiche No. _______ of the Deed Records
     for Montgomery County, Ohio; and

          WHEREAS, Robert E. Signom II and Lola A. Signom,
     are all of the general partners of MHR Properties; and

          WHEREAS, said Lease provides as follows:

                  Article 19.    Purchase Option.

               The parties agree that the present value of
          the property is $135,000. During the term of this
          Lease Tenant shall have the right to, at its sole
          option, purchase the property from Landlord for
          $135,000, which price shall be reduced by one-half
          (½) of all rents paid by Tenant to Landlord from
          the inception of this Lease to the time of pur-
          chase.

          WHEREAS, pursuant to the foregoing Article 19,
     effective on receipt of the July 1, 1991, rental pay-
     ment, the then current option purchase price for the
     property subject of said Lease was $108,500;

          WHEREAS, Landlord has entered into an Agreement
     for the sale of the property subject of said Lease in
     consideration of payment to the University from a third
     party purchaser in the amount of $220,000 which further
                              - 27 -

     requires that the Tenant’s Lease and purchase option be
     terminated and cancelled;

          WHEREAS, the Tenant has agreed to terminate and
     cancel said Lease by a gift of their interest in the
     property to the Landlord.

          Now, therefore, Landlord and Tenant hereby agree
     that Tenant shall gift to the Landlord its interest in
     said Lease and option to purchase pursuant to Article
     19 thereof; and Landlord and Tenant shall execute and
     record the Cancellation of Lease and Option to Purchase
     attached hereto as Exhibit “B” to commemorate termina-
     tion and cancellation of said Lease.

     Sometime in 1991 or 1992, Mr. Signom and Ms. Signom, as the

general partners of MHR Properties, signed a document entitled

“AGREEMENT FOR CANCELLATION OF LEASE” that was virtually identi-

cal to the August 15 draft acknowledgment.   Around August 1994,

Mr. Signom sent that signed document to the University for

signature by an appropriate officer of the University.   After

Brother Ploeger signed that document on behalf of the University,

Mr. Deas returned it to Mr. Signom by letter dated August 10,

1994.   (We shall refer to the document entitled “AGREEMENT FOR

CANCELLATION OF LEASE” as signed by petitioners and by Brother

Ploeger on behalf of the University as the final acknowledgment

document.)

     At a time that we are unable to find from the instant

record, petitioners retained Martin Nizny (Mr. Nizny) to perform

certain appraisal services.   Mr. Nizny prepared a letter ad-

dressed to Mr. Signom as a partner of MHR Properties which he

dated October 13, 1992 (Mr. Nizny’s letter dated October 13,
                             - 28 -

1992) and which provided in pertinent part:

     The purpose of this appraisal, at your request, is to
     estimate the market value of the Option to Purchase
     under the Leasehold interest in the building at 15-23
     North St. Clair Street, Dayton, Ohio.

        *         *     *       *         *         *       *

     After throughly analyzing the information gathered for
     this assignment, in particular, the verified arms-
     length transaction on the subject property that oc-
     curred on July 31, 1991, it is my opinion the value of
     the Option as of August 1, 1991 was $111,500.00. This
     amount represents the difference between the Referenced
     sale at $220,000.000 and your then current option
     purchase price of $108,500.00.

     Mr. Nizny prepared another letter addressed to Mr. Signom as

a partner of MHR Properties which he dated August 2, 1994 (Mr.

Nizny’s letter dated August 2, 1994) and which provided in

pertinent part:

     The purpose of this appraisal, at your request, is to
     estimate the market value of your Leasehold interest in
     the building at 15-23 North St. Clair Street, Dayton,
     Ohio.

     After thoroughly analyzing the information gathered for
     this assignment, in particular, the verified arms-
     length transaction on the subject property that oc-
     curred on July 31, 1991, it is my opinion the leasehold
     value as of August 1, 1991 was $111,500.00. This
     amount represents the difference between the Referenced
     sale at $220,000.00 and your then current option pur-
     chase price of $108,500.00.

     By invoice dated August 10, 1994, Mr. Nizny billed Mr.

Signom $250 for his appraisal services.       Mr. Signom paid that

invoice by check dated October 17, 1994.

     On September 26, 1994, petitioners filed a joint Form 1040,

U.S. Individual Income Tax Return, for 1991 (joint return).       The
                                - 29 -

date, including extensions, on which petitioners’ joint return

was due was October 15, 1992.

     In their joint return, petitioners deducted $111,500 for a

claimed noncash charitable contribution to the University.     As

required, petitioners filed Form 8283, Noncash Charitable Contri-

butions (Form 8283), with their joint return.    Petitioners

completed section B, Appraisal Summary, of Form 8283 relating to

a claimed charitable contribution deduction of more than $5,000

per item.   Petitioners attached Mr. Nizny’s letter dated October

13, 1992, and the final acknowledgment document to Form 8283.

They did not attach any other documents to Form 8283 and did not

otherwise disclose in their joint return all of the August 1

property transfers that were effected as of August 1, 1991,

pursuant to the final property exchange agreement.

     In Part I of Section B of Form 8283, entitled “Information

on Donated Property”, petitioners described the claimed donated

property as “OPTION TO PURCHASE REAL ESTATE AT LESS THAN FAIR

MARKET VALUE” and reported that its appraised fair market value

was $111,500.    Mr. Nizny signed the “Certification of Appraiser”

in Part III of Section B of Form 8283.    The date of the appraisal

of the “OPTION TO PURCHASE REAL ESTATE AT LESS THAN FAIR MARKET

VALUE” as reported in Part III of Section B of Form 8283 was

October 13, 1992.    Mr. Nizny’s address as reported in Part III of

Section B of    Form 8283 was an address to which he moved after

October 13, 1992.
                             - 30 -

     Brother Ploeger signed on behalf of the University the

“Donee Acknowledgment” in Part IV of Section B of Form 8283 and

acknowledged therein that the University received the claimed

donated property on August 1, 1991.    Nowhere in their joint

return did petitioners indicate that either MHR Properties’

leasehold interest or MHR Properties’ purchase option was termi-

nated as of a date other than August 1, 1991.    The date of

Brother Ploeger’s signature as reported in Part IV of Section B

of Form 8283 was September 21, 1994.

     In the notice issued to petitioners for 1991, respondent

determined, inter alia, to disallow the $111,500 claimed noncash

charitable contribution to the University.    Respondent further

determined in the notice that petitioners are liable for 1991 for

the accuracy-related penalty under section 6662(a).

                             OPINION

     Petitioners bear the burden of proving that the determina-

tions in the notice are erroneous.    See Rule 142(a); Welch v.

Helvering, 290 U.S. 111, 115 (1933).

Claimed Charitable Contribution Deduction

     In their joint return and in the petition, petitioners

claimed a charitable contribution deduction under section 170(a)

with respect to MHR Properties’ purchase option.    However,

petitioners argued at trial, and they argue on brief, that they

are entitled to a charitable contribution deduction with respect

to both MHR Properties’ leasehold interest and MHR Properties’
                               - 31 -

purchase option.    We conclude that petitioners have abandoned the

position in their joint return and in the petition.    See Rybak v.

Commissioner, 91 T.C. 524, 566 n.19 (1988).    We shall address

petitioners’ argument at trial and on brief that they are enti-

tled to a charitable contribution deduction with respect to both

MHR Properties’ leasehold interest and MHR Properties’ purchase

option.

     Section 170(a) generally allows a taxpayer a deduction for

any charitable contribution, as defined in section 170(c), made

during the taxable year.    Section 170(c) defines the term “chari-

table contribution” to mean a contribution or gift to or for the

use of one or more specified organizations (qualified recipient).

The parties’ initial dispute under section 170 is whether the

cancellation of MHR Properties’ St. Clair property interests

constitutes a contribution or gift within the meaning of section

170(c).6   In resolving that dispute, we bear in mind that the

sine qua non of a charitable contribution under section 170 is a

transfer of money or property without adequate consideration.

See United States v. American Bar Endowment, 477 U.S. 105, 118

(1986).    In limiting a deduction under section 170(a) to a

“contribution or gift” to or for the use of a qualified recipi-


     6
      The parties also have a disagreement over whether petition-
ers substantially complied with certain of the recordkeeping and
return requirements for charitable contribution deductions
prescribed by sec. 170(a) and sec. 1.170A-13, Income Tax Regs.
We address that disagreement infra note 12.
                              - 32 -

ent, “Congress intended to differentiate between unrequited

payments to qualified recipients and payments made to such

recipients in return for goods or services.   Only the former were

deemed deductible.”   Hernandez v. Commissioner, 490 U.S. 680, 690

(1989).   Congress also intended that a transfer of money or

property to or for the use of a qualified recipient qualify as a

contribution or gift for purposes of section 170 only if such

transfer was made with no expectation of any quid pro quo from

such recipient.   See Hernandez v. Commissioner, supra; see also

Osborne v. Commissioner, 87 T.C. 575, 581 (1986); Rusoff v.

Commissioner, 65 T.C. 459, 469 (1975), affd. without published

opinion 556 F.2d 559 (2d Cir. 1977).   In determining whether the

cancellation of MHR Properties’ St. Clair property interests by

petitioners, as the general partners of MHR Properties, was made

with the expectation of any quid pro quo from the University, we

shall focus on the external features relating to that cancella-

tion.   See Hernandez v. Commissioner, supra at 690-691; United

States v. American Bar Endowment, supra at 117-118.

     To support their position that the cancellation of MHR

Properties’ leasehold interest and MHR Properties’ purchase

option was a contribution or gift to the University within the

meaning of section 170(c), petitioners rely on (1) their own

testimony and that of certain other witnesses and (2) labels,

such as the label “gift”, that were used by them and certain

other witnesses at the trial in this case and that appeared in
                                  - 33 -

certain documentary evidence.       As for petitioners’ reliance on

certain testimony, we are not required to, and we shall not,

accept the self-serving testimony of Mr. Signom and Ms. Signom,

which was not corroborated by reliable evidence, that the cancel-

lation of MHR Properties’ St. Clair property interests was a

contribution or gift within the meaning of section 170(c).         See

Lerch v. Commissioner, 877 F.2d 624, 631-632 (7th Cir. 1989),

affg. T.C. Memo. 1987-295; Geiger v. Commissioner, 440 F.2d 688,

689-690 (9th Cir. 1971), affg. per curiam T.C. Memo. 1969-159;

Tokarski v. Commissioner, 87 T.C. 74, 77 (1986).       Nor shall we

rely on the testimony of Mr. Deas, John Hart (Mr. Hart), and Fran

Ary (Ms. Ary) to the extent such testimony suggests that peti-

tioners, as the general partners of MHR Properties, made a

contribution or gift to the University of MHR Properties’ St.

Clair property interests within the meaning of section 170(c).7

The Court found the testimony of Mr. Deas to be evasive in

responding to certain questions asked on cross-examination by

respondent’s counsel, the complete and truthful answers to which

could have adversely affected petitioners’ position under section

170.8       The Court also found Mr. Hart, the Director of Legal

        7
      We set forth infra note 10 our views regarding Mr. Nizny,
another witness at the trial in this case.
        8
      Despite his evasiveness in responding to certain questions,
Mr. Deas was constrained, after having been admonished by the
Court, to answer certain other questions, the answers to which
supported respondent’s position, and not petitioners’ position,
                                                   (continued...)
                               - 34 -

Affairs and Counsel of the University, to be evasive in certain

material respects during his testimony.   In addition, we some-

times had serious reservations as to whether Mr. Hart was testi-

fying from personal knowledge.   As for Ms. Ary, Vice President

for Advancement of the University, she did not begin working for

the University until around 1993, a few years after the transac-

tion in question.   She testified that it was her “understanding”

that petitioners had made a “gift” to the University in 1991 and

that she obtained that “understanding” from Mr. Hart, a witness

on whose testimony we generally are unwilling to rely.

     As for petitioners’ reliance on labels, such as the label

“gift”, it is the substance of what transpired with respect to

the cancellation of MHR Properties’ St. Clair property interests

that is determinative for tax purposes, not the labels or termi-

nology employed.    See, e.g., Frank Lyon Co. v. United States, 435

U.S. 561, 573 (1978); Helvering v. F. & R. Lazarus & Co., 308

U.S. 252, 255 (1939); Gregory v. Helvering, 293 U.S. 465, 469

(1935).   Consequently, we reject petitioners’ reliance on labels

to support their position under section 170.

     Petitioners’ position that they are entitled to a charitable

contribution deduction as a result of the cancellation of MHR

Properties’ St. Clair property interests rests on the following

contentions that they advance on brief:   (1) Petitioners, as the

     8
      (...continued)
under sec. 170.
                              - 35 -

general partners of MHR Properties, canceled MHR Properties’ St.

Clair property interests as early as July 6, 1991, and no later

than July 26, 1991; (2) that cancellation was separate from the

final exchange transaction that took place on August 1, 1991; and

(3) petitioners did not expect to, were not entitled to, and did

not receive any quid pro quo from the University in return for

the cancellation of those property interests.   Based on our

examination of the entire record in this case, we reject all of

those contentions.

     We consider first petitioners’ contention that the cancella-

tion of MHR Properties’ St. Clair property interests occurred as

early as July 6, 1991, and no later than July 26, 1991.   To

support that contention, petitioners rely on the July 6 document

and the July 22 document.   As for the July 6 document on which

petitioners rely, that document was prepared in anticipation of

finalizing and closing the exchange transaction to which the

University, Mr. Signom, and Mr. Felman had tentatively agreed and

related only to MHR Properties’ purchase option and not to MHR

Properties’ leasehold interest.   Moreover, the July 6 document

stated that Mr. Signom, instead of MHR Properties and/or Mr.

Signom and Ms. Signom as the general partners of that partner-

ship, was the grantor to the University of MHR Properties’

purchase option.   In addition, Mr. Signom signed the July 6

document in his individual capacity and not as a general partner

or otherwise as a representative of MHR Properties.   The signa-
                               - 36 -

ture of Ms. Signom does not appear on the July 6 document.      No

other individual signed the July 6 document as a representative

of MHR Properties.    Finally, although Mr. Signom sent the July 6

document to Mr. Packard, it was not sent to the University and

was never recorded.    On the instant record, we find that the July

6 document did not effect a cancellation of either MHR Proper-

ties’ purchase option or MHR Properties’ leasehold interest as of

July 6, 1991, or as of any other date.

     As for the July 22 document on which petitioners rely, on

July 22, 1991, Brother Ploeger signed that document, as well as

the July 22 St. Clair deed and the July 22 Ludlow deed, in

anticipation of finalizing and closing the draft property ex-

change agreement.    After Brother Ploeger signed the July 22

document and those two deeds, he sent them to Mr. Packard and Mr.

Deas to be held in their custody and to be used only in the event

that the parties to the draft property exchange agreement final-

ized and closed that agreement.    The University, Mr. Signom, and

Ms. Signom all anticipated that Mr. Signom and Ms. Signom would

sign the July 22 document on behalf of MHR Properties at the July

31 anticipated closing.    However, shortly after Brother Ploeger

signed the July 22 document and sent it, along with the two deeds

that he signed on July 22, 1991, to Mr. Packard and to Mr. Deas,

Mr. Signom advised Mr. Deas that Ms. Signom would be unable to

attend the July 31 anticipated closing.    At Mr. Signom’s request,

Mr. Deas mailed the July 22 document to Mr. Signom in order to
                               - 37 -

have Ms. Signom sign it prior to that anticipated closing.   Mr.

Deas expected Mr. Signom to have that document signed by Ms.

Signom and to bring it with him to the July 31 anticipated

closing.   On July 26, 1991, both Mr. Signom and Ms. Signom signed

the July 22 document.    We believe that the only reason petition-

ers signed the July 22 document on July 26, 1991, prior to the

closing of the final exchange transaction on August 1, 1991, was

because Ms. Signom was unable to attend that closing, and Mr.

Signom requested that Mr. Deas mail the July 22 document to him

so that Ms. Signom could sign it prior to the August 1 closing.

The July 22 document, as signed by Brother Ploeger on behalf of

the University on July 22, 1991, and by Mr. Signom and Ms. Signom

on behalf of MHR Properties on July 26, 1991, was delivered at

the August 1 closing.9   On the instant record, we find that the

July 22 document did not effect a cancellation of the Mumma/MHR

Properties lease agreement, including MHR Properties’ purchase

option, as of July 26, 1991, or as of any other date prior to

August 1, 1991, the date of the closing of the final exchange



     9
      On the instant record, we reject petitioners’ contention
that they delivered the July 22 document to Mr. Deas on July 26,
1991, after they signed it and prior to the August 1 closing.
Assuming arguendo that we were to have found that petitioners
returned the July 22 document to Mr. Deas after they signed it on
July 26, 1991, and before the August 1 closing, we nonetheless
find on the record in this case that such a delivery of that
document did not constitute a contribution or gift to the Univer-
sity of MHR Properties’ St. Clair property interests within the
meaning of sec. 170(c).
                                - 38 -

transaction pursuant to the final property exchange agreement.10

     We next address petitioners’ contention that the cancella-

tion of MHR Properties’ St. Clair property interests was separate

from the final exchange transaction that took place on August 1,

1991.     In support of that contention, petitioners maintain that

the only reason that the final property exchange agreement

required Mr. Signom to secure the cancellation of MHR Properties’

leasehold interest and MHR Properties’ purchase option was

because “Mr. Felman needed contractual assurance that the option

would be extinguished.”     If, as petitioners assert, the cancella-

tion of MHR Properties’ leasehold interest and MHR Properties’

     10
      The record contains certain documents, including a number
of documents that petitioners filed with their joint return,
which indicate that the date of the cancellation of MHR Proper-
ties St. Clair leasehold interest and/or MHR Properties’ purchase
option was Aug. 1, 1991. For example, in Part IV of Section B of
Form 8283 filed with petitioners’ joint return, Brother Ploeger
acknowledged that the University received the claimed donated
property (MHR Properties’ purchase option) on Aug. 1, 1991. In
addition, the final acknowledgment document that was signed by
petitioners sometime in 1991 or 1992 and by Brother Ploeger on
behalf of the University sometime around Aug. 10, 1994, stated
that the effective date of that document relating to the cancel-
lation of MHR Properties’ leasehold interest, including MHR
Properties’ purchase option, was Aug. 1, 1991. Even petitioners’
appraiser Mr. Nizny, in Mr. Nizny’s letter dated October 13,
1992, and Mr. Nizny’s letter dated August 2, 1994, which purport
to set forth Mr. Nizny’s opinion of the value as of Aug. 1, 1991,
of MHR Properties’ purchase option and MHR Properties’ leasehold
interest, respectively, stated that the “arms-length transaction
on the subject property * * * occurred on July 31, 1991". We are
unwilling to rely on either of those letters or on Mr. Nizny’s
testimony because we found him to be not credible and unreliable.
Nonetheless, those letters are noteworthy in that it must have
been Mr. Signom to whom Mr. Nizny addressed those letters who
informed Mr. Nizny that the “arms-length transaction on the
subject property * * * occurred on July 31, 1991".
                             - 39 -

purchase option had been a gift to the University, which was

completed no later than July 26, 1991, Mr. Felman would not have

needed any contractual assurance as of August 1, 1991, that MHR

Properties’ St. Clair property interests had been canceled.

However, on the record before us, we have found, and we believe

that Mr. Felman (as well as the University) concluded, that the

July 22 document did not effect a cancellation of MHR Properties’

leasehold interest and MHR Properties’ purchase option as of July

26, 1991, the date on which petitioners signed that document, or

on any other date prior to August 1, 1991.   That is why we

believe that when the University, Mr. Signom, and Mr. Felman

entered into the final property exchange agreement on August 1,

1991, that agreement (like the tentative property exchange

agreement) required Mr. Signom to secure the cancellation of

those property interests as part of the final exchange transac-

tion which closed on August 1, 1991.   On the instant record, we

find that the cancellation of MHR Properties’ St. Clair property

interests was not separate from the final exchange transaction

that took place at the August 1 closing.   We further find on that

record that that cancellation was effected as of August 1, 1991,

pursuant to the final property exchange agreement as an integral

part of that final exchange transaction.

     We turn now to petitioners’ contention that they did not

expect to, were not entitled to, and did not receive any quid pro

quo from the University in return for the cancellation of MHR
                              - 40 -

Properties’ St. Clair property interests.   On the instant record,

we reject that contention.   We have found on that record (1) that

petitioners anticipated that Mr. Signom would receive quid pro

quo from the University at the closing of the final exchange

transaction on August 1, 1991, (2) that Mr. Signom was entitled

under the final property exchange agreement to receive quid pro

quo from the University in the final exchange transaction, and

(3) that pursuant to that agreement he did receive such quid pro

quo in that transaction.   The quid pro quo that Mr. Signom

received in the final exchange transaction totaled $295,963 and

consisted of the Ludlow property valued in the final property

exchange agreement and for Ohio transfer tax purposes at

$253,000, $12,000 in cash, and relief from the mortgage of

$30,963 to which the Irving property was subject on August 1,

1991, when Mr. Signom transferred it to the University.

     Pursuant to the final property exchange agreement, the

University also received quid pro quo in the final exchange

transaction consisting of the cancellation of MHR Properties’ St.

Clair property interests by Mr. Signom and Ms. Signom as the

general partners of MHR Properties and the transfer to the

University by Mr. Signom in his individual capacity of the Irving

property.   The parties agree that MHR Properties’ St. Clair

property interests had a value of $111,500 when those interests

were canceled.   The parties do not agree on the fair market value

of the Irving property that Mr. Signom transferred to the Univer-
                              - 41 -

sity as part of the final exchange transaction.   At the time Mr.

Signom transferred the Irving property to the University, it

declared the value of that property for Ohio transfer tax pur-

poses to be $165,000.   Petitioners argue that the value of the

Irving property for Ohio transfer tax purposes is not the fair

market value of that property and that the value of that property

for Ohio transfer tax purposes is irrelevant to a resolution of

the issue before us under section 170.

     On the record before us, we are unable to determine whether

petitioners are correct that the value of the Irving property for

Ohio transfer tax purposes was not the fair market value of that

property when Mr. Signom transferred it to the University.

However, we need not resolve that question in order to determine

whether petitioners are entitled to a charitable contribution

deduction under section 170 as a result of the cancellation of

MHR Properties’ St. Clair property interests.   What is signifi-

cant in our resolving that issue is that pursuant to Ohio law the

University, as the grantee of the Irving property, declared the

value of that property for Ohio transfer tax purposes to be

$165,000, and Mr. Signom, as the grantor of that property,

acquiesced in that valuation when, as required by Ohio law, he

paid the Ohio transfer tax based on that declared value with

respect to his conveyance of the Irving property to the Univer-

sity as part of the final exchange transaction that occurred on

August 1, 1991.
                               - 42 -

     On the instant record, we find that the quid pro quo which

the University and Mr. Signom considered the University to have

received in the final exchange transaction from petitioners as

the general partners of MHR Properties and Mr. Signom in his

individual capacity totaled $276,500.   That quid pro quo was less

than the quid pro quo totaling $295,963 that the University and

Mr. Signom considered Mr. Signom to have received from the

University in that transaction.11

     Based on our examination of the entire record in this case,

we find that the cancellation of MHR Properties’ St. Clair

property interests did not constitute a contribution or gift of

property to the University within the meaning of section

170(c).12   We further find on that record that petitioners have

     11
      It is noteworthy that the July 22 document recited that
the cancellation of the Mumma/MHR Properties lease agreement,
including MHR Properties’ purchase option, was “mutually benefi-
cial” to the University and to MHR Properties and Mr. Signom and
Ms. Signom as the general partners of MHR Properties.
     12
      Assuming arguendo that we were to have found that peti-
tioners established that the cancellation of MHR Properties’ St.
Clair property interests qualified as a contribution or gift to
the University within the meaning of sec. 170(c), on the record
before us, we find that petitioners have failed to show that they
satisfied certain of the recordkeeping and return requirements
for charitable contribution deductions prescribed by sec. 170(a)
and sec. 1.170A-13, Income Tax Regs.

     The recordkeeping and return requirements for charitable
contribution deductions require a taxpayer, inter alia, to obtain
a qualified appraisal (qualified appraisal) for donated property
(except money and certain publicly traded securities) for which
the taxpayer claims a deduction in excess of $5,000. See sec.
1.170A-13(c)(1)(i) and (2)(i), Income Tax Regs. The qualified
                                                   (continued...)
                              - 43 -

failed to show that they are entitled to a charitable contribu-

tion deduction under section 170(a) with respect to the cancella-

tion of those property interests.13    Accordingly, we sustain

respondent’s determination disallowing that claimed deduction.




     12
      (...continued)
appraisal must be received by the donor before the due date,
including extensions, of the tax return on which a deduction is
first claimed under sec. 170 with respect to the donated prop-
erty. See sec. 1.170A-13(c)(3)(i) and (iv)(B), Income Tax Regs.
The due date of petitioners’ joint return, including extensions,
was Oct. 15, 1992. On the record before us, we find that peti-
tioners have failed to establish that they received a qualified
appraisal before Oct. 15, 1992. We decline to accept Mr. Nizny’s
testimony and other evidence in the record that he prepared,
signed, and provided to Mr. Signom on Oct. 13, 1992, a letter
setting forth his appraisal with respect to the MHR Properties’
purchase option. As we indicated supra note 10, we found Mr.
Nizny and the documents which he prepared that are in the record
to be unreliable. Moreover, Mr. Nizny’s testimony about Mr.
Nizny’s letter dated October 13, 1992, is inconsistent with
certain documentary evidence in the record that he prepared
before the trial in this case.
     13
      We have considered all of the arguments and contentions of
petitioners that are not discussed herein, including their
contentions relying on DuVal v. Commissioner, T.C. Memo. 1994-603
and Scheffres v. Commissioner, T.C. Memo. 1969-41. We find those
arguments and contentions to be without merit. We find DuVal and
Scheffres to be distinguishable from the instant case and peti-
tioners reliance on those cases to be misplaced.
                                 - 44 -

Accuracy-Related Penalty

     Respondent determined that petitioners are liable for the

year at issue for the accuracy-related penalty under section

6662(a).     In their reply brief, petitioners contend that respon-

dent’s determination is wrong because (1) “they correctly re-

ported their gift”, and (2) they “had substantial authority for

their return position that they gifted their St. Clair property

interests” to the University.14

     Section 6662(a) imposes an accuracy-related penalty equal to

20 percent of the tax resulting from a substantial understatement

of income tax.     An understatement is equal to the excess of the

amount of tax required to be shown in the tax return over the


     14
          In their opening brief, petitioners assert:

          Petitioners properly disclosed the relevant facts
     relating to both the charitable contribution to the
     University and the like-kind exchange. Accordingly,
     the substantial understatement penalty is not here
     applicable.

As we understand it, petitioners contend in their opening brief
that they made adequate disclosure within the meaning of sec.
6662(d)(2)(B)(ii) and the regulations thereunder with respect to
their claimed charitable contribution deduction. In their reply
brief, petitioners do not advance any argument relating to
disclosure of the “relevant facts” in their joint return. We
conclude that petitioners have abandoned the contention in their
opening brief that they made adequate disclosure within the
meaning of sec. 6662(d)(2)(B)(ii) and the regulations thereunder.
See Rybak v. Commissioner, 91 T.C. 524, 566 n.19 (1988). Assum-
ing arguendo that we were to have concluded that petitioners did
not abandon that contention, we find on the instant record that
they did not adequately disclose the relevant facts surrounding
the claimed charitable contribution. See sec. 6662(d)(2)(B)(ii);
sec. 1.6662-4(e)(1) and (f)(1) and (2), Income Tax Regs.
                               - 45 -

amount of tax shown in such return, see sec. 6662(d)(2)(A), and

is substantial in the case of an individual if the amount of the

understatement for the taxable year exceeds the greater of 10

percent of the tax required to be shown in the tax return for

that year or $5,000, see sec. 6662(d)(1)(A).

     The amount of the understatement is reduced to the extent

that it is attributable to, inter alia, an item for which there

is or was substantial authority.    See sec. 6662(d)(2)(B)(i).   In

order to satisfy the substantial authority standard of section

6662(d)(2)(B)(i), a taxpayer must show that the weight of the

authorities supporting the tax return treatment of an item is

substantial in relation to the weight of authorities supporting

contrary treatment.   See Antonides v. Commissioner, 91 T.C. 686,

702 (1988), affd. 893 F.2d 656 (4th Cir. 1990); sec. 1.6662-

4(d)(3)(i), Income Tax Regs.   The substantial authority standard

is not so stringent that a taxpayer’s treatment must be one that

is ultimately upheld in litigation or that has a greater than 50-

percent likelihood of being sustained in litigation.    See sec.

1.6662-4(d)(2), Income Tax Regs.    A taxpayer may have substantial

authority for a position even where it is supported only by a

well-reasoned construction of the pertinent statutory provision

as applied to the relevant facts.    See sec. 1.6662-4(d)(3)(ii),

Income Tax Regs.   There may be substantial authority for more

than one position with respect to the same item.    See sec.

1.6662-4(d)(3)(i), Income Tax Regs.
                              - 46 -

     On the instant record, we reject petitioners’ contention

that respondent’s determination under section 6662(a) is wrong

because “they correctly reported their gift”.    We have found on

that record that petitioners are not entitled to the claimed

charitable contribution deduction.

     On the instant record, we also reject petitioners’ conten-

tion that respondent’s determination under section 6662(a) is

wrong because they “had substantial authority for their return

position”.   On that record, we find that all of the authorities

on which petitioners rely to support their position regarding the

claimed charitable contribution deduction are distinguishable

from the instant case and that their reliance on those authori-

ties is misplaced.

     Based on our examination of the entire record before us, we

find that petitioners have failed to establish error in respon-

dent’s determination that they are liable for the year at issue

for the accuracy-related penalty under section 6662(a).   Conse-

quently, we sustain that determination.

     To reflect the foregoing and the concessions of petitioners,

                                     Decision will be entered

                               for respondent.
