                        T.C. Memo. 2001-28



                      UNITED STATES TAX COURT



                  ROBERT W. SUHR, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 15074-98.                    Filed February 8, 2001.



     Michael J. Johrendt, for petitioner.

     Gary R. Shuler, Jr., for respondent.



                        MEMORANDUM OPINION


     COLVIN, Judge:   Respondent determined deficiencies in

petitioner’s Federal income tax of $29,757 for 1994 and $15,856

for 1995 and accuracy-related penalties under section 6662(a) of

$2,640 for 1994 and $3,171 for 1995.

     After concessions, the issue for decision is whether
                                  2

petitioner is liable for tax on one-half of the capital gain

realized on the sale of a house (the Arden Road house) that his

former wife owned, one-half of the sale proceeds of which were

awarded to him when he and his wife were divorced.    We hold that

he is not liable for tax on any of the capital gain.    Thus,

petitioner is not liable for the accuracy-related penalty under

section 6662 for substantial understatement of tax for 1994

relating to the gain on the sale of the Arden Road house.1

       Section references are to the Internal Revenue Code in

effect during the years in issue.     Rule references are to the Tax

Court Rules of Practice and Procedure.

                              Background

       The parties submitted this case fully stipulated under Rule

122.

A.     Petitioner

       Petitioner was born in 1942, and he lived in Thornville,

Ohio, when he filed his petition.     Petitioner is an attorney and

has practiced law since 1970.

B.     Petitioner’s Marriage to Mary Lois Suhr

       Petitioner and Mary Lois Suhr (Mrs. Suhr) were married in

1964 in Columbus, Ohio.




       1
          Petitioner concedes that he is liable under sec. 6662 for
       1994 and 1995 relating to the settled issues.
                                   3

     In 1969, Mrs. Suhr bought a house on Arden Road in Columbus,

Ohio (the Arden Road house) for $40,000.     She paid for the house

in part by borrowing $7,000 from Dr. Wesley Suhr (not otherwise

identified in the record) on September 30, 1969.      The Arden Road

house was titled solely in Mrs. Suhr’s name.

     Petitioner and Mrs. Suhr obtained a $20,000 mortgage from

State Savings Bank secured by the Arden Road house on June 28,

1972.     They were jointly liable on the mortgage.

     Mrs. Suhr worked for an insurance company from 1969 to 1971.

She left that job in December 1971.     Petitioner provided the sole

financial support for Mrs. Suhr and their children thereafter.

Petitioner made payments on the mortgage to State Savings Bank

from 1972 to 1994.

C.   Petitioner’s and Mrs. Suhr’s Divorce

        Petitioner and Mrs. Suhr were divorced in April 1987

pursuant to a divorce decree entered by the Court of Common

Pleas, Franklin County, Ohio.     The divorce decree ended the

marriage, included provisions for custody and support of their

children, and divided their joint and separate property between

petitioner and Mrs. Suhr.
                                 4

     The divorce decree provided that the Arden Road house, which

was titled only in Mrs. Suhr’s name, “shall remain in the names

of” petitioner and Mrs. Suhr but granted Mrs. Suhr exclusive

possession of that house.   The divorce decree required petitioner

and Mrs. Suhr to sell the Arden Road house no later than 8 years

after the divorce; i.e., by June 15, 1995.    Until then, the

divorce decree required petitioner to pay the mortgage, real

estate taxes, and insurance on the house.    The divorce decree

also provided that petitioner and Mrs. Suhr “shall do all things

necessary to facilitate the sale of the house”.    The divorce

decree provided that petitioner and Mrs. Suhr would each receive

one-half of the net equity from the sale of the Arden Road house;

that is, the amount remaining after paying the mortgage, real

estate commission, prorated taxes, and other selling costs.

     The divorce decree did not require Mrs. Suhr to transfer her

title or any interest in the Arden Road house to petitioner, and

she never did so.   In contrast, the divorce decree required Mrs.

Suhr to transfer her right, title, and interest to 1577-1579

South High Street, Columbus, Ohio, by quitclaim deed to

petitioner.   Mrs. Suhr transferred her title to the South High

Street property to petitioner on December 9, 1988.

D.   Petitioner’s Personal Financial Statement

     Petitioner signed a personal financial statement on

September 23, 1989 (i.e., after he was awarded, but before he
                                  5

received, one-half of the net equity from the Arden Road house),

to obtain a loan from Park National Bank.    The statement said

that petitioner owned a 50-percent interest in the Arden Road

house, that he acquired it in November 1969, and that it was

subject to an $18,000 mortgage.

E.   Sale of the Arden Road House

     Mrs. Suhr sold the Arden Road house for $155,000 on July 27,

1994.   Mrs. Suhr signed the Seller’s Affidavit and Survivorship

Deed, and Mrs. Suhr and petitioner each signed an Addendum to

Sales Contract, Agency Disclosure Statement, and Addendum to

Inspection Clause.    State Savings Bank released petitioner and

Mrs. Suhr from the mortgage September 12, 1994, upon payment of

the $20,632.55 balance owed on the mortgage.    Selling expenses

totaled $10,928.50.

     Pursuant to the divorce decree, petitioner and Mrs. Suhr

each received $61,156.84 from the sale of the Arden Road house.

On July 27, 1994, Mrs. Suhr used the proceeds from the sale of

the Arden Road house to buy a house in Gahanna, Ohio, for

$112,900, and she thus was eligible for nonrecognition of gain

under former section 1034.

                             Discussion

A.   Background

     The issue for decision is whether petitioner must recognize

gain in 1994 from the sale of the Arden Road house.    Generally, a
                                   6

taxpayer must recognize gain on the sale of a personal residence

he or she owns.     See sec. 1001(c); United States v. Mitchell, 403

U.S. 190, 197 (1971); Potter v. Commissioner, 47 B.T.A. 607, 623

(1942).    In determining ownership, State law controls.     See

United States v. Mitchell, supra; Aquilino v. United States, 363

U.S. 509, 512-513 (1960).

B.   Whether Petitioner Had an Ownership Interest in the Arden
     Road House

     Respondent contends that petitioner is subject to capital

gains tax on one-half of the proceeds from the sale of the Arden

Road house because the house was marital property.       See Berish v.

Berish, 432 N.E.2d 183, 184-185 (Ohio 1982); Wolfe v. Wolfe, 350

N.E.2d 413, 422 (Ohio 1976), overruled on other grounds Cherry v.

Cherry, 421 N.E.2d 1293 (Ohio 1981).       Respondent contends that,

because the Ohio court considered the Arden Road house to be

marital property, it conferred ownership in the house on

petitioner.

     We disagree.    Property need not be jointly owned to be

marital property under Ohio law.       Under Ohio law, marital

property includes property that is currently owned by either

spouse or both spouses, and that was acquired by either spouse or

both spouses during the marriage.       See Ohio Rev. Code Ann. sec.

3105.171(A)(3)(a) (Anderson 2000).2      Respondent’s reliance on Berish


     2
          Ohio Rev. Code Ann. sec. 3105.171(A)(3) (Anderson 2000)
                                                     (continued...)
                           7



2
 (...continued)
provides as follows:

3105.171 Equitable division of marital and separate
property; distributive award

     *       *      *       *      *      *      *
     (3)(a) “Marital property” means, subject to
division (A)(3)(b) of this section, all of the
following:

     (i) All real and personal property that
     currently is owned by either or both of the
     spouses, including, but not limited to, the
     retirement benefits of the spouses, and that
     was acquired by either or both of the spouses
     during the marriage;

     *       *         *    *      *      *        *

     (b) “Marital property” does not include any
separate property.

     *       *         *    *      *      *        *

     (6)(a) “Separate property” means all real and
personal property and any interest in real or personal
property that is found by the court to be any of the
following:

          (i) An inheritance by one spouse by
     bequest, devise, or descent during the course
     of the marriage;

          (ii) Any real or personal property or
     interest in real or personal property that
     was acquired by one spouse prior to the date
     of the marriage;

     *       *         *    *      *      *        *

          (iv) Any real or personal property or
     interest in real or personal property
     acquired by one spouse after a decree of
     legal separation issued under section 3105.17
                                              (continued...)
                                 8

v. Berish, supra, and Wolfe v. Wolfe, supra, for the proposition

that marital property under Ohio law is jointly owned by both

spouses is misplaced.   Berish and Wolfe establish a presumption

that property purchased during a marriage is marital property;

they are silent on the question of ownership or coownership of

that property.   Indeed, the fact that an asset is marital

property does not establish that both spouses own the property.

See Ohio Rev. Code Ann. sec. 3105.171(A).

     Respondent points out that the divorce decree stated that

the Arden Road house “shall remain in the names of” petitioner

and Mrs. Suhr.   Respondent contends that this shows that

petitioner had an ownership interest in the house.   We disagree.

The Court of Common Pleas awarded petitioner one-half of the

proceeds from the sale of the Arden Road house but did not

transfer title or grant him an ownership interest in it.     That


     2
      (...continued)
          of the Revised Code;

               (v) Any real or personal property or
          interest in real or personal property that is
          excluded by a valid antenuptial agreement;

          *        *      *       *      *      *      *

               (vii) Any gift of any real or personal
          property or of an interest in real or
          personal property that is made after the date
          of the marriage and that is proven by clear
          and convincing evidence to have been given to
          only one spouse.
                                 9

the court did not intend to award an ownership interest in the

Arden Road house to petitioner is shown by the fact that,

elsewhere in the divorce decree, the court ordered Mrs. Suhr to

transfer her title in the 1577-1579 South High Street property to

petitioner.   This shows that when the court intended to award

ownership, it did so expressly; it did not expressly award

ownership of the Arden Road house, which we construe to mean it

did not so intend.

     The fact that the court awarded petitioner one-half of the

proceeds on the sale of the Arden Road house does not mean that

it awarded him an ownership interest in the property.   See

Urbauer v. Commissioner, T.C. Memo. 1997-227 (tax liability is

triggered by a taxpayer’s ownership interest in property, not by

his or her marital interest in the proceeds from the sale of the

property); Rushworth v. Rosie, No. 98-G-2186 (Ohio Ct. App. Oct.

22, 1999) (a right to receive proceeds from the sale of property

is not an ownership interest under Ohio law).   In Friscone v.

Commissioner, T.C. Memo. 1996-193, a divorce decree awarded the

wife 55 percent of the proceeds from the sale of stock owned by

her former husband and provided that she was liable for 55

percent of the tax due to the sale of the stock.   We held that

the divorce decree awarded the wife a 55-percent ownership

interest in the stock.   The Ohio court did not provide comparable

language in the instant case.
                                10

     The fact that petitioner was jointly liable on the mortgage

and that he made payments on the mortgage from 1972 to 1994 does

not establish that he had an ownership interest in the Arden Road

house.   See Lighthorse v. Clinefelter, 521 N.E.2d 1146, 1148

(Ohio Ct. App. 1987) (inclusion of wife's name as grantor,

mortgagee, and lessor in connection with certain parcel of land

owned by husband was insufficient to vest title to land in wife).

Also, the fact that petitioner executed some of the closing

documents for the sale of the house does not establish that he

had an ownership interest in the Arden Road house because the

divorce decree required him to cooperate in the sale of the

house.

     Similarly, the fact that petitioner signed a personal

financial statement which stated that he owned a 50-percent

interest in the Arden Road house does not establish that he had

an ownership interest in the house.    Petitioner signed the

statement after he was awarded (but before he received) half of

the net equity from the sale of the Arden Road house.    His

signature on the financial statement does not establish that he

coowned the house.

     To reflect concessions and the foregoing,

                                           Decision will be entered

                                      under Rule 155.
