                       118 T.C. No. 19




                UNITED STATES TAX COURT



       JOHN C. AND TATE M. TODD, Petitioners v.
     COMMISSIONER OF INTERNAL REVENUE, Respondent



Docket No. 17046-99.               Filed April 19, 2002.



     R disallowed deductions claimed on account of a
contribution of corporate shares to a private
foundation (other than a private foundation described
in sec. 170(b)(1)(E), I.R.C.) on the alternative
grounds that the shares were not qualified appreciated
stock, within the meaning of sec. 170(e)(5)(B)(i),
I.R.C., and that the shares were not publicly traded
securities, within the meaning of sec. 1.170A-
13(c)(7)(xi), Income Tax Regs., so that the
substantiation requirements of sec. 1.170A-13(c)(1)(i),
Income Tax Regs., applied but were not satisfied.
     1. Held: Deductions disallowed; the shares were
not qualified appreciated property.
     2. Held, further, deductions disallowed on
alternative grounds; the shares were not publicly
traded securities, so that the substantiation
requirements were applicable but not satisfied.
                               - 2 -

     Richard C. Kaufman, for petitioners.

     Frederick J. Lockhart, Jr., for respondent.



     HALPERN, Judge:   By notice of deficiency dated August 13,

1999 (the notice), respondent determined deficiencies in

petitioners’ Federal income tax liabilities for petitioners’

taxable (calendar) years 1994 through 1997 (the audit years) of

$14,181, $61,540, $88,832, and $33,971, respectively.    Among the

adjustments giving rise to respondent’s determination of

deficiencies is respondent’s disallowance of deductions for

charitable contributions petitioners claimed for each of the

audit years (the disallowed deductions).    Petitioners have

assigned error only with respect to that disallowance.

Accordingly, we need decide only whether petitioners are entitled

to the disallowed deductions, all other adjustments being deemed

conceded by petitioners.   See Rule 34(b)(4).

     Unless otherwise noted, all 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.   Petitioners bear the burden of proof.   See Rule

142(a).
                                - 3 -



                           FINDINGS OF FACT

     Some facts have been stipulated and are so found. The

stipulations of facts, with accompanying exhibits, are

incorporated herein by this reference.

Residence

     Petitioners resided in Greeley, Colorado, at the time the

petition was filed.

The Foundation and Contribution Thereto

     On December 20, 1994, petitioners formed the Todd Family

Foundation (the foundation), a Colorado nonprofit corporation.

     On December 27, 1994, petitioner John C. Todd (petitioner)

transferred 6,350 shares of stock (the transfer date, the

transfer, and the shares, respectively) in Union Colony Bancorp

(Bancorp), a Colorado corporation, to the foundation.    On the

transfer date, the foundation was a private foundation (as

defined in section 509(a)), other than a private foundation

described in section 170(b)(1)(E).

Petitioners’ Tax Returns

     Petitioners filed a Form 1040, U.S. Individual Income Tax

Return (the Form 1040), for 1994.    In calculating their taxable

income shown on the Form 1040, petitioners claimed a deduction

for a charitable contribution on account of the transfer.

Attached to the Form 1040 is a Form 8283, Noncash Charitable

Contributions (the Form 8283), on which petitioners provided
                               - 4 -

information concerning the transfer, including petitioners’ “cost

or adjusted basis” in the shares, $33,338, the fair market value

of the shares, $553,847, and a statement of the method used to

determine the fair market value:   “Sales of other shares at same

time”.   The portion of the Form 8283 that provides for the

certification of an appraiser is without entries.   No appraisal

summary with respect to the shares is attached to the Form 8283

or otherwise included with the Form 1040.   Because of

contribution limitations, petitioners claimed a deduction on the

Form 1040 on account of the transfer in the amount of $88,879.

They claimed additional deductions of $152,692, $221,066, and

$56,906 on their 1995, 1996, and 1997 income tax returns,

respectively.

Sale of the Shares

     The statement on the Form 8283 that the fair market value of

the shares was $553,847 is based on the foundation’s sale of the

shares (for that amount) on January 5, 1995, to First National of

Nebraska, Inc., a Nebraska corporation, pursuant to an agreement

of merger involving Bancorp.

Bancorp and the Bank

     On the transfer date, Bancorp was a bank holding company,

owning all of the issued and outstanding shares of stock of Union

Colony Bank, Greeley, Colorado, a state-chartered Colorado bank

(the bank).   On that date, shares of Bancorp were not listed on
                                - 5 -

the New York Stock Exchange, the American Stock Exchange, or any

city or any regional stock exchange, nor were the shares

regularly traded in the national or any regional over-the-counter

(OTC) market for which published quotations are available.     The

shares were not shares of an open-end investment company

(commonly know as a mutual fund), as provided in section 1.170A-

13(c)(7)(xi)(A)(3), Income Tax Regs.

Procedure for Purchase or Sale of Shares of Bancorp

     Before and throughout 1994, the procedure for someone

wishing to purchase or sell shares of Bancorp was to contact an

officer of the bank or a local stockbroker specializing in the

shares of Bancorp.   The bank or broker would try to match a

potential seller with a potential buyer.   That could prove

difficult, since Bancorp shares were not frequently sold.     The

bank maintained a numerical list, by certificate number, of all

share transactions (the bank’s list).   The bank’s list showed the

date, seller, buyer, number of shares, share cost (if available),

and certificate number.   Gill & Associates, Inc. (Gill &

Associates), a member of the National Association of Securities

Dealers since 1984, acted as a placement agent or “matchmaker”

for certain of the sales of the shares.    As a matchmaker, Gill &

Associates maintained a list of individuals wishing to purchase

shares and contacted these individuals when approached by others

interested in selling shares.   In order to quote a price to an
                                 - 6 -

interested purchaser, a representative from Gill & Associates

would call the bank to obtain the net asset value on the books of

the corporation.   Gill & Associates believed the book value was a

fair value for the stock of Bancorp, and it used the book value

to compute what it believed was a fair price for a share of

Bancorp.   Gill & Associates did not have access to the bank’s

list.   Although Gill & Associates could readily quote to an

interested buyer what it believed to be a fair price for Bancorp

shares, Bancorp shares were not necessarily then available for

sale.   If no shares were available, Gill & Associates would put

the interested person’s name on a list and contact that person

when shares became available.    On six to eight occasions during

the 10-year period from 1984 through 1994, when Bancorp shares

became available for sale, Gill & Associates would place an

advertisement, for a brief period, in the local newspaper.     Gill

& Associates charged a fee of 25 cents for each share placed, and

acted as placement agent as an accommodation to the bank, to

encourage its business relationship with the bank.

     On December 1, 1994, eight individuals, including

petitioner, owned or controlled 50.5 percent of the issued and

outstanding shares of Bancorp.    Petitioner owned or controlled

7 percent of those shares.
                               - 7 -

Respondent’s Adjustments

      In determining the deficiencies here in question, respondent

disallowed all of the deductions claimed by petitioners on

account of the transfer except for $33,338 (petitioner’s cost

basis in the shares), which respondent allowed for 1994.

Respondent explained his disallowance on the basis that

petitioners had failed to establish that any of the amounts

disallowed met the requirements of section 170, which allows a

deduction for charitable contributions.


                              OPINION

I.   Introduction

      On December 27, 1994 (the transfer date), petitioner

transferred 6,350 shares of Bancorp (the shares) to the

foundation, claiming charitable contribution deductions on

account thereof on petitioners’ 1994 through 1997 income tax

returns.   Respondent disallowed all those deductions except that

he allowed a charitable contribution deduction equal to

petitioner’s cost basis in the shares, $33,338, for 1994.

Petitioners have assigned error to respondent’s determination of

deficiencies to the extent that respondent disallowed

petitioners’ claimed charitable deductions (the disallowed

deductions).   In support of their assignment of error,

petitioners aver:   “Pursuant to I.R.C. §§ 170(a) and 170(e)(5)(A)

and (B), Petitioners properly took the charitable deduction to
                                  - 8 -

the Foundation in an amount equal to the fair market value of the

Bank stock in the amount of $553,847.”      Respondent denies that

averment and, on brief, argues that petitioners are not entitled

to the disallowed deductions because the shares were not

“qualified appreciated stock”, as that term is defined in section

170(e)(5)(B).      Alternatively, respondent argues that petitioners

are entitled to no deduction on account of the transfer of the

shares to the foundation because petitioners failed to comply

with regulations requiring the substantiation of claimed

charitable contributions.      Respondent does not, however, ask for

any increased deficiency in connection with his alternative

argument (he has allowed a deduction of $33,338 for 1994).

      We agree with respondent that the shares were not qualified

appreciated stock.      We also agree with respondent that

petitioners did not substantiate the transfer as required by

regulations.      Therefore, petitioners are not entitled to the

disallowed deductions.      After setting forth the relevant

provisions of the Code and the regulations, we will discuss our

reasons for agreeing with respondent.

II.   Code and Regulations

      A.   Code

      In pertinent part, section 170(a)(1) provides:
                           - 9 -

SEC. 170.   CHARITABLE, ETC., CONTRIBUTIONS AND GIFTS.

    (a)   Allowance of Deduction.--

        (1) General rule.–-There shall be allowed as a
     deduction any charitable contribution * * *
     payment of which is made within the taxable year.
     A charitable contribution shall be allowable as a
     deduction only if verified under regulations
     prescribed by the Secretary.

In pertinent part, section 170(e) provides:

     SEC. 170(e). Certain Contributions of Ordinary
Income and Capital Gain Property.--

             (1) General rule.–-The amount of any
     charitable contribution of property otherwise
     taken into account under this section shall be
     reduced by the sum of–-

             *    *    *     *     *   *   *

              (B) in the case of a charitable contribution--

             *    *    *     *     *   *   *

                 (ii) to or for the use of a private
             foundation (as defined in section 509(a)),
             other than a private foundation described
             in subsection (b)(1)(E),

     the amount of gain which would been long-term
     capital gain if the property contributed had
     been sold by the taxpayer at its fair market
     value (determined at the time of such
     contribution).

             *    *    *     *     *   *   *

        (5) Special rule for contributions of stock
     for which market quotations are readily
     available.--

                  (A) In general.–-Subparagraph (B)(ii)
             of paragraph (1) shall not apply to any
             ontribution of qualified appreciated stock.
                              - 10 -

                   (B) Qualified appreciated stock.--* * *
              for purposes of this paragraph, the term
              “qualified appreciated stock” means any stock
              of a corporation--

                      (i) for which (as of the date of the
                  contribution) market quotations are readily
                  available on an established securities
                  market, and

                      (ii) which is capital gain property (as
                  defined in subsection (b)(1)(C)(iv)).

     B.   Regulations

     Section 1.170A-13, Income Tax Regs., sets forth record

keeping and return requirements for deductions for charitable

contributions.   Paragraph (c) thereof applies to charitable

contributions made after December 31, 1984, by, among others, an

individual of an item of property “other than money and publicly

traded securities to which § 1.170A-13(c)(7)(xi)(B) does not

apply” if the amount claimed or reported as a deduction with

respect to the property exceeds $5,000.   Paragraph (c) further

provides:   “No deduction under section 170 shall be allowed with

respect to a charitable contribution to which this paragraph

applies unless the substantiation requirements described in

paragraph (c)(2) of this section are met.”   In pertinent part,

section 1.170A-13(c)(2)(i), Income Tax Regs., provides:

          (2) Substantiation requirements. (i) In general.
     * * * a donor who claims or reports a deduction with
     respect to a charitable contribution to which this
     paragraph (c) applies must comply with the following
     three requirements:
                              - 11 -

          (A) Obtain a qualified appraisal (as defined in
     paragraph (c)(3) of this section) for such property
     contributed. If the contributed property is a partial
     interest, the appraisal shall be of the partial
     interest.

          (B) Attach a fully completed appraisal summary (as
     defined in paragraph (c)(4) of this section) to the tax
     return * * * on which the deduction for the
     contribution is first claimed (or reported) by the
     donor.

          (C) Maintain records containing the information
     required by paragraph (b)(2)(ii) of this section.

     Among the requirements set forth in section 1.170A-13(c)(3),

Income Tax Regs., for a qualified appraisal are that it be made

not earlier than 60 days prior to the date of the contribution,

be prepared, signed and dated by a qualified appraiser, contain

the qualifications of the qualified appraiser, contain a

statement that it was prepared for income tax purposes, show the

date on which the property was appraised, show the fair market

value of the property on the date of contribution, and show the

method of valuation and the specific basis for the valuation.

     Among the requirements set forth in section 1.170A-13(c)(4),

Income Tax Regs., for an appraisal summary are that it be signed

and dated by the donee and the appraiser on a form prescribed by

the Internal Revenue Service and that it contain certain

information.   The information required includes a description of

the property, the manner and date of the property’s acquisition

by the donor, the date of the receipt of the property by the

donee, the donor’s cost for the property and the appraised fair
                                - 12 -

market value of the property on the date of contribution,

information identifying the donor and donee, information

identifying the qualified appraiser signing the appraisal

summary, and a prescribed appraiser declaration.

     Among the records retention requirements set forth in

section 1.170A-13(b)(2)(ii), Income Tax Regs., is that, if the

value of the contributed property was determined by appraisal, a

copy of the signed appraisal report be retained.

     The term “publicly traded securities” is defined for

purposes of section 1.170A-13(c), Income Tax Regs., in

subparagraph (7)(xi) thereof.    In pertinent part, that definition

is as follows:

         (xi) Publicly traded securities. (A) In general.
     * * * the term “publicly traded securities” means
     securities * * * for which (as of the date of the
     contribution) market quotations are readily available
     on an established securities market. For purposes of
     this section, market quotations are readily available
     on an established securities market with respect to a
     security if:

         (1) The security is listed on the New York Stock
     Exchange, the American Stock Exchange, or any city or
     regional exchange in which quotations are published on
     a daily basis, including foreign securities listed on a
     recognized foreign, national, or regional exchange in
     which quotations are published on a daily basis;

         (2) The security is regularly traded in the
     national or regional over-the-counter market, for which
     published quotations are available; or

         (3) The security is a share of an open-end
     investment company (commonly known as a mutual fund)
     registered under the Investment Company Act of 1940, as
     amended (15 U.S.C. 80a-1 to 80b-2), for which
                                  - 13 -

       quotations are published on a daily basis in a
       newspaper of general circulation throughout the United
       States.

       (If the market value of an issue of a security is
       reflected only on an interdealer quotation system, the
       issue shall not be considered to be publicly traded
       unless the special rule described in paragraph
       (c)(7)(xi)(B) of this section is satisfied.)

III.       Discussion

       A.    Introduction

       Petitioners are not entitled to the disallowed deductions if

the shares were not, on the transfer date, “qualified appreciated

stock” (qualified appreciated stock), within the meaning of

section 170(e)(5)(B).       If the shares were not qualified

appreciated stock, then, because there is no dispute that the

shares were contributed to a private foundation (other than a

private foundation described in section 170(b)(1)(E)),

petitioners’ deduction on account of the transfer cannot exceed

$33,338.1      Alternatively, petitioners are not entitled to the

disallowed deductions if they are subject to, and failed to

satisfy, the substantiation requirements set forth in section

1.170A-13(c)(2)(i), Income Tax Regs. (the substantiation

requirements).2


       1
        There is no dispute that the shares were capital assets
in petitioner’s hands and that his adjusted basis in the shares
was $33,338.
       2
        Pursuant to sec. 1.170A-13(c)(1)(i), Income Tax Regs., if
the substantiation requirements are not satisfied (and a
                                                   (continued...)
                              - 14 -

     There is a common denominator for determining whether the

shares were qualified appreciated stock on the transfer date and

whether petitioners are subject to the substantiation

requirements.   That common denominator is whether, on the

transfer date, market quotations with respect to the shares were

readily available on an established securities market.    See sec.

170(e)(5)(B)(i); sec. 1.170A-13(c)(7)(xi)(A), Income Tax Regs.3

Because we find that, on the transfer date, market quotations

with respect to the shares were not readily available on an

established securities market, (1) the shares were not qualified

appreciated stock, (2) petitioners are subject to the

substantiation requirements (which they failed to satisfy), and

(3) as a result of either (1) or (2), or both, they are not

entitled to the disallowed deductions.



     2
      (...continued)
deduction in excess of $5,000 is claimed), no deduction   is
allowable. Respondent has, however, in effect, allowed    a
deduction of $33,338 for 1994. See supra, Respondent’s
Adjustments. We have accepted such a concession in the    past.
Hewitt v. Commissioner, 109 T.C. 258, 266 (1997), affd.   without
published opinion 166 F.3d 332 (4th Cir. 1998).
     3
        The substantiation requirements apply unless, on the
transfer date, the shares were “publicly traded securities to
which § 1.170A-13(c)(7)(xi)(B) does not apply”. See sec. 1.170A-
13(c)(1)(i), Income Tax Regs. That condition is met only if, on
the transfer date, with respect to the shares, market quotations
were readily available on an established securities market,
without application of the special rule found in subdiv. (B) of
sec. 1.170A-13(c)(7)(xi), Income Tax Regs., and subject to the
exception set forth in subdiv. (C) thereof. See sec. 1.170A-
13(c)(7)(xi)(A), Income Tax Regs.
                             - 15 -

     B.   Disagreement

     The disagreement between the parties is over the meaning of

the requirement (sometimes, the market quotations requirement)

that “market quotations * * * [be] readily available on an

established securities market”.   Petitioners argue for a “plain

language” reading of the requirement.   They rely on the testimony

of their expert witness, Eugene N. White, Ph.D., who was accepted

by the Court as an expert in banking and securities markets, and

who was of the opinion that Bancorp stock was traded on the OTC

market, which is an established part of the securities market, so

that Bancorp stock “qualifies as a security that was traded on an

established securities market”.   Petitioners argue that, on the

transfer date, market quotations were readily available for the

shares since, on that date, if requested, Gill & Associates could

have readily determined the book value of the bank’s assets,

which it believed to be a fair value for Bancorp’s stock.

     Respondent argues that the market quotations requirement was

not satisfied because, on the transfer date:   (1) Bancorp shares

did not trade on, and therefore, did not have market quotations

on, an established securities market, and (2) even if Bancorp

shares did so trade, market quotations with respect to those

shares were not readily available.    With respect to whether the

shares constituted qualified appreciated stock, respondent

summarizes his argument as follows:
                                 - 16 -

          The evidence adduced at trial reveals that Bancorp
     stock was traded by a single broker; stock quotations
     could be obtained only from that broker; during a ten-
     year period, the broker advertised the Bancorp stock
     only six or eight times, in a newspaper of local
     circulation; and only the issuer of the stock
     maintained records of sales transactions. In view of
     these facts, treating the Bancorp stock as qualified
     appreciated stock would not be consistent with the
     expressed intention of Congress to limit the exception
     for qualified appreciated stock to “certain situations
     in which the potential for abuse, including
     overvaluation, is minimized.” * * *

     Respondent points out that petitioners concede that the

shares were not part of an issue of securities that satisfied any

of the circumstances described in section 1.170A-13(c)(7)(xi)(A),

Income Tax Regs.

     C.     Discussion

             1.   Tax Reform Act of 1984

     We begin with an examination of two sections of the Tax

Reform Act of 1984 (Tax Reform Act of 1984 or TRA), Division A of

the Deficit Reduction Act of 1984, Pub. L. 98-369, 98 Stat. 494.

The first section is TRA section 155,      98 Stat. 691, which gives

rise to the substantiation requirements and, in subsection

(a)(6)(C), defines the term “publicly traded securities” to mean

“securities for which (as of the date of the contribution) market

quotations are readily available on an established securities

market”.4    The second section is TRA section 301(b), 98 Stat.


     4
        While TRA sec. 155 gives rise to the substantiation
requirements, it does not impose them, but directs the Secretary
                                                   (continued...)
                              - 17 -

778, which adds to the Internal Revenue Code section 170(e)(5),

which contains the term “qualified appreciated stock” and, in

pertinent part, defines that term as “any stock of a corporation

for which (as of the date of the contribution) market quotations

are readily available on an established securities market”.

     The legislative history of both TRA provisions informs us

that, with respect to each, Congress’s purpose was to combat

inflated deductions resulting from the overvaluation of property

contributed to charities.   In Hewitt v. Commissioner, 109 T.C.

258, 261-262, 265 (1997), affd. without published opinion

166 F.3d 332 (4th Cir. 1998), we reviewed the history of TRA

section 155 and stated:

     [I]t is clear that the principal objective of * * *
     [TRA] section 155 was to provide a mechanism whereby
     respondent would obtain sufficient return information
     in support of the claimed valuation of charitable
     contributions of property to enable respondent to deal
     more effectively with the prevalent use of
     overvaluations.

     H.R. 4170, 98th Cong., 2d Sess. (1984), is the bill that,

when enacted, included the Tax Reform Act of 1984.   H. Rept. 98-

432 (Part 2) (1984) is the supplemental report of the Committee

on Ways and Means on H.R. 4170.   With respect to the reason for

adding section 170(e)(5) to the Internal Revenue Code, the report



     4
      (...continued)
to prescribe the requirements by regulation. TRA sec. 155(a)(1);
see Hewitt v. Commissioner, supra at 261-262. Sec. 1.170A-13(c),
Income Tax Regs., contains that prescription.
                                - 18 -

states the Committee on Ways and Means’ belief:    “[T]hat

deductibility at full fair market value for gifts of appreciated

stock to private nonoperating foundations should be permitted in

certain situations in which the potential for abuse, including

overvaluations, is minimized.”     Id. at 1464.

     The rebuttable presumption of formal consistency is a

presumption applicable in the interpretation of statutes.    The

presumption is that, when the drafter of a legal document uses

the same language in more than one portion of the same document,

a court may presume a consistency of meaning.     See Dickerson, The

Interpretation and Application of Statutes 224 (1975).    Congress

used the same language to express the market quotations

requirement in TRA sections 155 and 301.    Nothing here leads us

to believe that Congress intended inconsistent meanings, and the

commonality of legislative purpose leads us to believe that a

consistent meaning was intended.    We conclude that the market

quotations requirement has the same meaning for the purpose of

defining qualified appreciated stock and in determining when

securities are publicly traded (so as to exempt a donor from the

substantiation requirements).

          2.   Market Quotations Requirement

     In general, if a charitable contribution is made in property

other than money, the amount of the contribution is the fair

market value of the property at the time of the contribution.
                              - 19 -

Sec. 1.170A-1(c)(1), Income Tax Regs.   Fair market value is the

price at which the property would change hands between a willing

buyer and a willing seller, neither being under any compulsion to

buy or sell and both having reasonable knowledge of the relevant

facts.   Sec. 1.170A-1(c)(2), Income Tax Regs.   The fair market

value of a share of stock or a security is not necessarily equal

to its market quotation.   See sec. 1.170A-13(c)(7)(xi)(D), Income

Tax Regs.   Nevertheless, we assume that Congress believed that

the existence of readily available market quotations would

substantially assist in, if not determine, fair market valuation

(and discourage overvaluation).   We do not agree with petitioners

that the market quotations requirement was met because Bancorp

shares were occasionally traded by Gill & Associates, who could

provide a suggested share price based on the net asset value of

the bank.   Such share price did not necessarily reflect a price

that any willing buyer or seller had accepted or would accept.

Gill & Associates charged a flat fee of 25 cents for each share

traded, and acted as a placement agent as an accommodation to the

bank, to encourage its business relationship with the bank.    We

do not accept Gill & Associates’ procedures for quoting prices as

a reliable proxy for fair market valuation.   The intendment of

the market quotations requirement would not be served by

accepting procedures such as those followed by Gill & Associates

with respect to Bancorp shares as satisfying the requirement.
                              - 20 -

          3.   Section 1.170A-13(c)(7)(xi)(A), Income Tax Regs.

     Section 1.170A-13(c)(7)(xi)(A), Income Tax Regs., describes

circumstances in which the market quotations requirement is met

for purposes of exempting contributions of certain publicly

traded securities from the substantiation requirements.   See sec.

1.170A-13(c)(1)(i), Income Tax Regs.   Section 1.170A-

13(c)(7)(xi)(A), Income Tax Regs., does not purport to be

applicable to the interpretation of the term “qualified

appreciated stock”.   Nevertheless, given our conclusion as to the

consistent meaning of the market quotations requirement, we

believe that section 1.170A-13(c)(7)(xi)(A), Income Tax Regs.,

also describes circumstances in which the market quotations

requirement is met for the purpose of determining whether the

shares constituted qualified appreciated stock.5

     In the petition, petitioners aver that the market quotations

requirement was satisfied by virtue of the Bancorp shares’

satisfying either subdivision (1) or (2) of section 1.170A-

13(c)(7)(xi)(A), Income Tax Regs.   During the trial of this case,

however, petitioners conceded that, on the transfer date, the

Bancorp shares did not satisfy any of the subdivisions of section


     5
        We need not be concerned with the special rule provided
in sec. 1.170A-13(c)(7)(xi)(B), Income Tax Regs., which applies,
among other conditions, only if the issue of a security in
question is regularly traded in a market that is reflected by the
existence of an interdealer quotations system for the issue.
That condition was not here met. See sec. 1.170A-
13(c)(7)(xi)(B)(2)(ii), Income Tax Regs.
                               - 21 -

1.170A-13(c)(7)(xi)(A), Income Tax Regs.      Petitioners rely on

their plain language reading of the market quotations requirement

and argue that the regulation is invalid because inconsistent

with that reading.   Since we reject petitioners’ plain language

reading, we reject petitioners’ argument based on that reading,

that the regulation is invalid.

     Petitioners have failed to satisfy the market quotations

requirement for purposes of determining whether the shares were

(1) publicly traded so as to be exempt from the substantiation

requirements and (2) qualified appreciated stock.

          4.    Substantiation Requirements

     Petitioners have failed to show that they complied with the

three substantiation requirements specified in section 1.170A-

13(c)(1), Income Tax Regs.   First, there is no evidence that they

met the requirements specified in section 1.170A-13(c)(3), Income

Tax Regs., for a qualified appraisal.   Second, no appraisal

summary is attached to the Form 8283 submitted with the Form

1040, as required by section 1.170A-13(c)(2)(B), Income Tax Regs.

Third, there is no evidence that they maintained records

containing the information required by section 1.170A-

13(b)(2)(ii), Income Tax Regs.

     We find that petitioners failed to meet the substantiation

requirements.   Accordingly, except with respect to the $33,338

respondent allowed for 1994, no charitable deductions are allowed
                                - 22 -

to them on account of the transfer of the shares to the

foundation.     See sec. 1.170A-13(c)(1)(i), Income Tax Regs.

           5.    Qualified Appreciated Stock

      Since the shares were not qualified appreciated stock,

petitioners’ deduction on account of the transfer is, for a

second reason, limited to $33,338.

IV.   Conclusion

      Respondent has prevailed on the only issue for decision.

Petitioners are not entitled to the disallowed deductions.


                                           Decision will be entered

                                      for respondent.
