                        T.C. Memo. 1999-225



                      UNITED STATES TAX COURT



     ESTATE OF AMBROSINA BLANCHE LOPES, DECEASED, JAMES W.
                  LOPES, TRUSTEE, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 5012-98.                        Filed July 8, 1999.



     Paul J. Barulich, for petitioner.

     Marion T. Robus, for respondent.



                        MEMORANDUM OPINION


     GERBER, Judge:   This case is before the Court on cross-

motions for partial summary judgment under Rule 121.1   Respondent

determined a deficiency of $4,210,985 in the Federal estate tax


     1
       All section references are to the Internal Revenue Code in
effect as of the date of decedent's death, and all Rule
references are to the Tax Court Rules of Practice and Procedure,
unless otherwise indicated.
                                - 2 -


of the Estate of Ambrosina Blanche Lopes (decedent).    The sole

issue for our consideration is whether fractional ownership

interests in realty held in a survivor's trust and in a qualified

terminal interest property (QTIP) marital trust should be

aggregated in order to determine whether discounts should apply

to those interests.    At the time these motions were brought

before us, Estate of Mellinger v. Commissioner, 112 T.C. 26, 33

(1999), was pending before another division of this Court.      The

parties agreed that the Estate of Mellinger opinion would likely

be determinative of the remaining issue in this case.    All other

issues determined in the deficiency notice have been resolved.

                             Background

     Decedent died on October 1, 1993.    At the time of her death,

decedent had undivided interests in 21 separate California ranch

properties.    These interests had been held in two trusts, a

survivor's trust and a QTIP marital trust, as established in a

1985 trust agreement between decedent and her husband, Joaquim C.

Lopes (Joaquim).    Decedent's son, James W. Lopes (James), also

held undivided interests in some of the ranch properties.

     Joaquim predeceased decedent in 1990.    At that time, the

properties were allocated between the trusts according to the

agreement.    The community property and separate property of

decedent were placed in the survivor's trust, while all of

Joaquim's community property was placed in the marital trust.
                                - 3 -


The marital trust allowed for a QTIP election by the trustee

under section 2056.    Because the QTIP marital trust met the test

in section 2056(b)(7), respondent allowed a marital deduction in

the Estate of Joaquim Lopes for the value of the property

interests passing into that trust.

     After Joaquim's death, decedent made gifts of undivided

interests in properties held in the survivor's trust to James.

James also purchased interests in more of the survivor's trust

properties.    Decedent died shortly after the last of these

transfers.    Though the validity of the transfers of these

interests was debated at one time, the parties have come to an

agreement about the gross fair market values of a 100-percent

interest in the properties and about which of the fractional

interests in each of the properties are to be included in

decedent's gross estate.    The parties also have reached an

agreement as to the percentage amount of the fractional interest

discount to the undivided fair market value of each of the

properties.    The parties' Stipulation of Settled Issues contains

the agreed amounts of each adjustment if we decide either to

aggregate the interests for valuation purposes or to value the

properties in each trust separately.

      Rule 121(b) provides that a motion for summary judgment

shall be allowed and considered if the pleadings and admissions

show that there is no genuine issue of material fact and that a
                                 - 4 -


decision may be rendered as a matter of law.    See Sundstrand

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

(7th Cir. 1994); Zaentz v. Commissioner, 90 T.C. 753, 754 (1988).

In this case both parties agree that no issues of material fact

remain in dispute and that a decision may be rendered as a matter

of law.    We agree with them.   Consequently, the issue herein is

ripe for summary judgment.

                             Discussion

     Section 2031(a) provides that the value of property

described in sections 2033 through 2044 shall be included in a

decedent's gross estate.    Under section 2033, all property

beneficially owned by the decedent at the time of death will be

included in the gross estate.    Section 2044 includes in the gross

estate the value of all property in which the decedent had a

qualified income interest for life and for which a deduction was

allowed to the estate of a predeceased spouse under section

2056(b)(7) (QTIP).    Upon the death of the second spouse, the QTIP

is taxed as part of the second spouse's estate.    See sec.

2044(c).

     Property includable in the gross estate is generally

included at its fair market value at the time of death.    See

secs. 2031-2044.    The fair market value is defined as that price

at which the property would change hands between a willing buyer

and a willing seller, neither being under any compulsion to buy
                                  - 5 -


or sell and both having reasonable knowledge of the relevant

facts.   See United States v. Cartwright, 411 U.S. 546, 551

(1973); sec. 20.2031-1(b), Estate Tax Regs.

     The issue here is whether the property interests held in the

survivor's trust should be aggregated with the property interests

held by the QTIP marital trust for the purpose of determining the

fair market value of the property passing from decedent.     If the

interests are not aggregated, the values will be discounted to

reflect lack of marketability and minority interests.     See Estate

of Mellinger v. Commissioner, supra at 33.      We have already

rejected the same aggregation argument advanced by respondent, in

Estate of Mellinger and in Estate of Nowell v. Commissioner, T.C.

Memo. 1999-15.    We find no factual or legal distinction that

would result in a different conclusion in this case.

     In Estate of Mellinger, the decedent died holding stock in

her revocable trust and in a QTIP trust, much like decedent in

this case.    See Estate of Mellinger v. Commissioner, supra at 27.

Each of the trusts held shares of stock, which, when combined,

would have represented a controlling block of shares in the

company.     See id.   The Commissioner argued that the shares should

be aggregated for valuation purposes.     This Court, citing the

reasoning of the Fifth Circuit in Estate of Bonner v. United

States, 84 F.3d 196, 198 (5th Cir. 1996), held that the

fractional interests held in QTIP trusts should not be merged
                                 - 6 -


into 100-percent fee ownership with other fractional interests

owned by an estate.    See Estate of Mellinger v. Commissioner, 112

T.C. at 36-37.    In Estate of Bonner the court specifically stated

that there was nothing in section 2044 to require the merger of

QTIP assets with other assets.    See Estate of Bonner v. United

States, supra at 198.    In Estate of Mellinger, it was explained

that nothing in section 2044 nor in the legislative history

indicated that the decedent should be treated as the owner of the

QTIP shares.    See Estate of Mellinger v. Commissioner, supra at

36.

      This analysis is equally applicable to the facts before us.

Nothing in section 2044 or the accompanying legislative history

indicates that Congress intended that the property that "passes

through" a decedent's estate under section 2044(c) be treated as

if the decedent actually owned that property for purposes of

aggregation.    Nor is there any indication that those property

interests should be merged or aggregated with interests in the

same property includable in the decedent's gross estate pursuant

to other Code sections for purposes of determining Federal estate

tax value.   Section 2044 provides only that the fair market value

of property in which the decedent had a qualifying income

interest for life should be included in the gross estate.    See

sec. 2044(a).    Thus, the fractional interests of the survivor's

trust and the QTIP trust should be valued separately.
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     Because the parties have resolved all remaining issues and

stipulated the amounts to be included in the gross estate,

                                      An appropriate order and

                              decision will be entered.
