internal_revenue_service department of the treasury index number dollar_figure number release date washington dc person to contact telephone number refer reply to cc dom corp 1-plr-107965-98 date date acquiring target state x date date a b c d e in re dear this letter is in response to your request dated date for rulings under sec_368 of the internal_revenue_code on behalf of the above-captioned taxpayers additional information with respect to the proposed transaction was submitted in letters dated date date and date the information submitted for our consideration is summarized as follows acquiring a state x corporation is a diversified open-end management company that has elected to be taxed as a regulated_investment_company ric under acquiring uses the accrual_method of accounting and files its tax returns on a fiscal_year ending on date acquiring’s investment objective is to provide its shareholders with long-term growth of capital by investing in a diversified portfolio of equity securities with emphasis on companies with above-average earnings growth rates target a state x corporation is also a diversified open-end management company that has elected to be taxed as a ric target uses the accrual_method of accounting and files its tax returns on a fiscal_year ending on date target’s investment objective is to provide investors with a high total return consistent with prudent risk target’s current_assets are primarily invested in equity securities of domestic and international companies acquiring and target each offer four classes of stock with identical rights and fees class a shares have a maximum initial sales charge of a and are offered to a limited group of investors class b shares incur no initial sales charge when purchased but are subject_to ongoing account maintenance fees and rule 12b-1 distribution fees between b and c respectively and a contingent deferred sales charge cdsc ranging between d and e if redeemed within four years from purchase in general class b shares of stock will automatically convert into class d shares of stock eight years from purchase class c incur no initial sales charge when purchased but are subject_to account maintenance and rule 12b-1 distribution fees of between b and c respectively and are subject_to a cdsc of e if redeemed within one year of purchase class d shares incur a maximum initial sales charge of a and are subject_to an ongoing maintenance fee of b for what has been represented to be a valid business_purpose the following transaction has been proposed target will transfer all of its assets and liabilities to acquiring in exchange for an equal value of newly issued acquiring class a b c and d common voting_stock target will distribute to its shareholders all the acquiring stock it received in the transaction each target shareholder will receive shares of acquiring on a pro_rata basis with the same class designation and the same account maintenance and distribution fees and sales charges if any as the target shares held by such shareholder immediately prior to the proposed transaction target shareholders who own fractional shares in target will receive fractional shares of acquiring not cash in exchange thereof target will then dissolve in accordance with the laws of state x and will terminate its registration under the investment_company act of the act acquiring and target have made the following additional representations the fair_market_value of the acquiring stock received by each target shareholder will be approximately equal to the fair_market_value of the target stock surrendered in the exchange acquiring will acquire at least percent of the fair_market_value of the net assets and at least percent of the fair market of the gross assets held by target immediately prior to the reorganization for purposes of this representation amounts used by target to pay its reorganization expenses amounts paid_by target to shareholders who receive cash or other_property and all redemptions and distributions except for redemptions in the ordinary course of acquiring’s business as an open-end investment_company as required by sec_22 of the act pursuant to a demand of a shareholder and regular normal dividends made by target immediately preceding the transfer will be included as assets of target held immediately prior to the reorganization there will be no payments to dissenters as shareholders may redeem their shares at any time acquiring has no plan or intention to reacquire any of its stock issued in the transaction except in connection with its legal_obligation under sec_22 of the act acquiring has no plan or intention to sell or otherwise dispose_of any of the assets of target acquired in the transaction except for dispositions made in the ordinary course of business target will distribute to its shareholders the stock of acquiring it receives pursuant to the plan_of_reorganization the liabilities of target assumed by acquiring and any liabilities to which the transferred assets of target are subject were incurred by target in the ordinary course of its business following the reorganization acquiring will continue the historic_business of target or use a significant portion of target’s historic_business_assets in the continuing business acquiring target and the shareholders of target will pay their respective expenses if any incurred in connection with the reorganization a b c d e f g h i there is no intercorporate indebtedness existing between target and acquiring j k l m n o p that was issued acquired or will be settled at a discount acquiring and target each meets the requirements of a regulated_investment_company as defined in sec_368 and ii the fair_market_value of the assets of target transferred to acquiring will equal or exceed the sum of the liabilities assumed by acquiring plus the amount of liabilities if any to which the transferred assets are subject acquiring does not own directly or indirectly nor has it owned during the past five years directly or indirectly any stock of target stock acquiring is not under the jurisdiction of a court in a title_11_or_similar_case within the meaning of sec_368 acquiring and target have elected to be taxed as rics under sec_851 and for all their taxable periods including the last short taxable_period ending on the date of the reorganization for target have qualified for the special tax treatment afforded rics under the code and after the reorganization acquiring intends to continue to so qualify there is no plan or intention by acquiring or any person related to acquiring as defined in sec_1_368-1 to acquire or redeem any of the stock of acquiring issued in the transaction either directly or through any transaction agreement or arrangement with any other person other than redemptions in the ordinary course of acquiring’s business as an open-end investment_company as required by sec_22 of the act during the five-year period ending on the date of the transaction neither target nor any person related to target as defined in sec_1_368-1 of the income_tax regulations without regard to sec_1_368-1 will have directly or through any transaction agreement or arrangement with any other person i acquired stock of target with consideration other than shares of acquiring or target except for shares of target stock acquired from dissenters in the transaction ii redeemed or made distributions with respect to target stock except for redemptions in the ordinary course of target’s business as an open-end investment_company as required by sec_22 of the act and distributions necessary to qualify for the special tax treatment afforded regulated_investment_companies under sec_852 as amended and made in the ordinary course of target’s business as a qualified ric q prior to or in the transaction neither acquiring nor any person related to acquiring as defined in sec_1 e will have acquired directly or through any transaction agreement or arrangement with any other person stock of target with consideration other than shares of acquiring based solely on the information and the representations set forth above we rule as follows the acquisition by acquiring of substantially_all of the assets of target as described above will qualify as a reorganization within the meaning of sec_368 and acquiring and target will each be deemed a_party_to_a_reorganization within the meaning of sec_368 target will not recognize any gain_or_loss on the transfer of its assets to acquiring in exchange solely for voting shares of acquiring or on the distribution of the acquiring stock to target shareholders sec_361 and c acquiring will not recognize any gain_or_loss on the receipt of the assets of target in exchange for voting shares of acquiring a the basis of target’s assets in the hands of acquiring will be the same as the basis of those assets in the hands of target immediately prior to the reorganization sec_362 acquiring’s holding_period for the target assets acquired will include the period during which such assets were held by target sec_1223 the shareholders of target will not recognize any gain_or_loss on the receipt of voting shares of acquiring including fractional shares to which they may be entitled solely in exchange for their shares in target sec_354 the basis of the acquiring shares received by target shareholders including fractional shares to which they may be entitled will be the same in the aggregate as the basis of the target shares surrendered in the exchange sec_358 the holding_period of the acquiring shares received by target shareholders in exchange for their acquiring shares including fractional shares to which they may entitled will include the period during which the exchanged target shares were held provided that the target shares were held as capital assets in the hands of the target shareholders on the date of the exchange sec_1223 pursuant to sec_381 and sec_1_381_a_-1 the tax_year of target will end and acquiring will succeed to and take into account the items of target described in sec_381 subject_to the provisions and limitations specified in sec_381 sec_382 sec_382 and sec_384 and the regulations thereunder no opinion is expressed about the federal_income_tax treatment of the proposed transaction under other provisions of the code and regulations or about the tax treatment of any conditions existing at the time of or effects resulting from the proposed transaction that are not specifically covered by the above rulings specifically no opinion was requested and none is expressed about whether acquiring or target qualifies as a ric that is taxable under subchapter_m part i of the code this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent each affected taxpayer must attach a copy of this letter to the federal_income_tax return for the taxable_year in which the transaction covered by this ruling letter is consummated in accordance with the power_of_attorney on file in this office we have sent copies of this letter to your authorized representatives sincerely yours assistant chief_counsel corporate by ____________________ howard w staiman assistant to the chief cc dom corp


department of the treasury internal_revenue_service washington d c t a x e x e m p t a n d g o v e r n m e n t e n t i t i e s d i v i s i o n contact person telephone number number release date date date uniform issue list legend m c x dear ------------------ under sec_513 sec_514 and sec_501 of the internal_revenue_code on m’s behalf the information provided indicates that m is a charitable_organization exempt from federal_income_tax under sec_501 of the code as an organization described in sec_501 m offers gift annuities to its donors m proposes to offer an annuity_contract to c an individual the proposed annuity_contract would establish a deferred gift annuity under which c makes a charitable_contribution of dollar_figure----------- in exchange for the obligation of m to pay an annuity to c in fixed amounts over the life of c with the beginning date for payment deferred to some date in the future annuity at any time during a period of eight years from the time c who is currently age --- reaches age --- to the time c reaches age --- when this election is made the annual annuity_payment will be determined based on c’s age at the time payments begin--the older c is the larger the annual annuity payments the value of the annuity_contract varies depending on the starting date elected by c for purposes of valuing the annuity issued in exchange for the charitable_contribution by c m will use the highest possible value of the annuity_contract dollar_figure----------- which would be the current value of the annuity with a starting date at age ---- and an annual annuity of dollar_figure--- based on the the annuity_contract allows c to elect the commencement_date of the payments under the this responds to a letter from m’s authorized representatives who have requested rulings the following rulings have been requested annuity_contracts issued by m as described above are charitable gift annuities a sec_2 the income earned by m from investment of annuity funds will not be unrelated debt- the issuance of deferred charitable gift annuities of the type described above will not mortality tables set forth in sec_7520 of the code and sec_20_2031-7 of the estate_taxes regulations and the interest rates as set forth in sec_7520 since the actual starting date and therefore the actual value of the annuity_contract will not be finally established until a later year m and c will place the highest possible value on the annuity_contract rulings requested result in income from an unrelated_trade_or_business as defined in sections of the code financed income under sec_514 of the code defined in sec_501 of the code law sec_501 of the code provides that an organization described in sec_501 shall be exempt from tax under sec_501 only if no substantial part of its activities consists of providing commercial-type_insurance sec_501 which is exempt from tax under sec_501 after application of sec_501 the activity of providing commercial-type_insurance shall be treated as an unrelated_trade_or_business as defined in sec_513 not include charitable gift annuities annuity if i a portion of the amount_paid in connection with the issuance of the annuity is allowable as a deduction under sec_170 or sec_2055 and ii the annuity is described in sec_514 determined as if any amount_paid in cash in connection with such issuance were property business taxable_income of every organization that is described in sec_501 means the gross_income derived by any organization from any unrelated_trade_or_business regularly carried on by it less allowable deductions which are directly connected with the carrying on of such trade_or_business both computed with certain modifications sec_501 of the code provides that the term commercial-type_insurance shall sec_512 of the code provides that the term unrelated_business_taxable_income sec_511 of the code in part imposes a tax for each taxable_year on the unrelated sec_501 of the code provides that in the case of an organization described in sec_501 of the code provides that the term charitable_gift_annuity means an sec_514 of the code provides that the term debt-financed_property means any sec_513 of the code provides that the term unrelated_trade_or_business means in the case of any organization subject_to the tax imposed by sec_511 any trade_or_business the conduct of which is not substantially related aside from the need of such organization for income or funds or the use it makes from the profits derived to the exercise or performance by such organization of its charitable or other purpose or function constituting the basis for its exemption under sec_501 sec_514 of the code provides that in computing the unrelated_business_taxable_income for any taxable_year a percentage of net_income derived from debt-financed_property should be included_property which is held to produce income and with respect to which there is an acquisition_indebtedness at any time during the taxable_year sec_514 of the code provides that the term acquisition_indebtedness does not include an obligation to pay an annuity which a is the sole consideration issued in exchange for property if at the time of the exchange the value of the annuity is less than percent of the value of the property received in the exchange b is payable over the life of one individual in being at the time the annuity is issued or over the lives of two individuals in being at such time and c is payable under a contract which i does not guarantee a minimum amount of payments or specify a maximum amount of payments and ii does not provide for any adjustment of the amount of the annuity payments by reference to the income received from the transferred property or any other_property analysis payable over the lifetime of one individual in being at the time the annuity is issued the fact that the amount of the annual annuity is dependent on the date at which c elects to begin the payments does not alter the fact that those payments will be made over the life of c the annuity_contract does not guarantee a minimum nor specify a maximum number of payments nor does it provide for adjustment by reference to the income received from the transferred property or any other_property the only way in which the annuity_payment is adjusted is based upon the age of c at the time the payments commence as determined by the table forming a part of the annuity_contract since the requirements of sec_514 are met the annuity_contract is described in that section and is therefore within the definition of charitable_gift_annuity in sec_501 borrowing of money by the issuing organization and the sales aspect of the transaction has been ignored it is for this reason that the defining elements of a charitable_gift_annuity are found in sec_514 of the code since that provision exempts qualifying annuity_contracts from being considered acquisition_indebtedness which might otherwise lead to interest rents or dividends earned by charities from investment of donations received in exchange for annuity historically it appears that the issuance of charitable gift annuities has been treated as a the annuity_contract that m proposes to issue to c provides for an annuity that will be in the case of the annuity_contract which m proposes to issue to c the manner in which since the annuity_contract meets the requirements of sec_514 of the code and a contracts being treated as unrelated_debt-financed_income viewed as the borrowing of money which is statutorily removed from the definition of acquisition_indebtedness the appropriate focus when analyzing a proposed charitable_gift_annuity is on the borrowing and not on the terms of its repayment the borrowing is repaid by m is irrelevant so long as the requirements of sec_514 of the code are met here the parties have chosen to provide a deferred_annuity_contract payable over the life of the annuitant that allows the annuitant to elect the starting date of the annuity payments m is prepared to pay a larger annual annuity with each year that c defers the starting date of the annuity and the contract contains a table specifying the amount of the annual annuity_payment depending on the age of c in the year payments commence however regardless of the year in which payments commence the deferred_annuity will be payable over the life of c charitable_contribution income_tax deduction under sec_170 may be allowable when c makes a contribution to m in exchange for the annuity_contract the contract meets the definition of sec_501 and in accordance with sec_501 will not constitute commercial-type_insurance the activity of m in providing this type of deferred charitable_gift_annuity should therefore not be treated under sec_501 as unrelated_trade_or_business as defined in sec_513 conclusion above will not be treated under sec_501 of the code as unrelated_trade_or_business as defined in sec_513 acquisition_indebtedness set forth in sec_514 of the code and therefore the income earned by m from investment of the annuity funds will not be unrelated_debt-financed_income under sec_514 charitable_gift_annuity as defined in sec_501 of the code facts upon which they are based income_tax consequences of the transactions described above under any other provision of the code the annuity_contract issued by m to c as described above meets the requirements of a these rulings are made on the understanding that there will be no material changes in the except as specifically ruled upon above no opinion is expressed concerning the federal the activity of m in providing the deferred charitable_gift_annuity to c as described the proposed annuity_contract fits within the annuity exception to the definition of accordingly based on the information submitted we rule as follows this ruling letter is directed only to the organization that requested it sec_6110 of the code provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file in this office a copy of this letter is being sent to m’s authorized representative a copy of this letter should be kept in m’s permanent records telephone number are shown in the heading of this letter for joseph chasin if you have any questions about this ruling please contact the person whose name and manager exempt_organizations technical group charles barrett sincerely


internal_revenue_service number info release date index number -------------- ----------------------- ---------------------------- in re - - department of the treasury washington dc person to contact --------------------- id no ----------- telephone number --------------------- refer reply to cc psi b01 - genin-150302-03 date date dear sir or madam this responds to your recent letter in which it was requested that we recognize thetaxpayer’s election to be an s_corporation effective date a corporation which meets the definition of a small_business_corporation under sec_1362 of the internal_revenue_code may elect to be treated as an s_corporation in order for an s_corporation_election to be effective for the taxable_year in which it is made it must be made within the first two and one-half months of the corporation’s taxable_year sec_1362 if an s election is made after that time then the corporation will not be treated as an s_corporation until the taxable_year following the one in which the s election was filed sec_1362 an election made after the first two and one-half months of the taxable_year in which it is intended to be effective may be treated as effective if the secretary determines that there was reasonable_cause for the corporation’s failure to make a timely election sec_1362 announcement copy enclosed provides guidance on seeking relief for late s_corporation elections generally to request relief for a late s_corporation_election you must request a private_letter_ruling from the national_office the procedures for requesting a private_letter_ruling are set out in revproc_2003_1 copy enclosed in addition revproc_2003_1 requires taxpayers to submit a user_fee along with their ruling_request the standard user_fee for a private_letter_ruling is dollar_figure however taxpayers with gross_income of less than dollar_figure million on their tax_return for the most recent 12-month taxable_year qualify for a reduced user_fee in the amount of dollar_figure if you qualify for the reduced fee you must include a statement certifying your gross_income for the last 12-month taxable_year otherwise the higher fee will apply if you decide to submit a formal request for a private_letter_ruling please review appendix b of revproc_2003_1 and be certain to include all required procedural statements also include the proper user_fee and any documents that substantiate your intent to be an s_corporation from inception please refer your request to our office by adding the following to the address attn cc pa t p o box ben franklin station washington dc direct to cc psi room we hope that this information is helpful to you if you have additional questions please contact rebekah myers at not a toll-free call as requested in the power_of_attorney on file with this office a copy of this letter is being sent to the taxpayer s dianna k miosi sincerely dianna k miosi chief branch office of office of the associate chief_counsel passthroughs and special industries enclosures announcement revproc_2003_1


t c memo united_states tax_court estate of albert fratini deceased marion friedeberg personal representative petitioner v commissioner of internal revenue respondent docket no filed date nickolas p tooliatos ii for petitioner allan d hill for respondent memorandum findings_of_fact and opinion ruwe judge respondent determined a deficiency of dollar_figure in petitioner's federal estate_tax after concessions the issues remaining for decision are to what extent if any did ms friedeberg contribute toward the purchase of various real properties bank accounts and certificates of deposit that were held in the joint name of decedent and ms friedeberg on the date of decedent's death whether decedent's_estate is entitled to reduce the amount required to be included under section by claimed fractional interest discounts applied to decedent's interest in parcels of real_property owned in joint_tenancy with ms friedeberg on his date of death and whether pursuant to sec_2053 the estate is entitled to a deduction for more than percent of the mortgage debt outstanding on jointly owned real properties includable in the estate findings_of_fact some of the facts have been stipulated and are so found the stipulation of facts and supplemental stipulation of facts are incorporated herein by this reference albert fratini decedent who was a resident of san francisco california died on date decedent was not married when he died for years preceding his death decedent continuously lived with marion friedeberg ms friedeberg is the estate's personal representative and the sole beneficiary under decedent's holographic will at the time she filed the petition herein ms friedeberg resided in san francisco california 1unless otherwise indicated 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 before beginning his relationship with ms friedeberg decedent was married to ms annemarie fratini decedent and ms fratini were married on date they separated on date and their marriage was terminated by a final judgment of dissolution in the superior court of san francisco county california dated date ms friedeberg was born on date in berlin germany between and ms friedeberg spent years in a concentration camp during world war ii she moved to the united_states in and attended school until the 11th grade upon leaving school ms friedeberg became employed as a filing clerk until from date to date ms friedeberg was married to mr werner friedeberg they separated on date and their marriage was terminated on date pursuant to a final judgment of dissolution in the superior court of san francisco county california mutual friends introduced decedent and his wife to ms friedeberg and her husband in from to the couples maintained a casual friendship in date both couples separated and decedent and ms friedeberg began living together at the time that decedent and ms friedeberg began living together decedent was employed as a project engineer for metal tile co although decedent and ms friedeberg lived in san francisco decedent traveled to and worked in los angele sec_3 to days a week at the time decedent and ms friedeberg began their relationship in decedent owned among other things several pieces of real_property from until his death decedent owned a parcel of real_property located pincite laidley street laidley san francisco california the laidley property was purchased for dollar_figure on date ms fratini transferred her interest in laidley to decedent by quitclaim_deed on date decedent transferred to ms friedeberg an undivided one-half joint_tenancy interest in laidley the parties agree that the fair_market_value of laidley on the date of decedent's death was dollar_figure from until his death decedent owned a parcel of real_property including a building thereon located pincite valencia street valencia san francisco california the building had apartments and commercial spaces in decedent acquired an adjacent lot for parking hereinafter we shall refer to the building and parking lot as valencia the purchase prices of the building and the parking lot were dollar_figure and dollar_figure respectively at the time of purchase the titles to the building and the parking lot were held in the names of decedent and ms fratini as joint_tenants on date ms fratini executed a quitclaim_deed to valencia in favor of decedent as part of their marital dissolution proceeding by grant deed on date decedent transferred to ms friedeberg an undivided one-half joint_tenancy interest in valencia the parties agree that the fair_market_value of valencia on the date of decedent's death was dollar_figure from until his death decedent owned a cottage located pincite south fitch road south fitch healdsburg california on date decedent and ms fratini acquired title to south fitch as joint_tenants for dollar_figure in decedent acquired an adjacent lot at a cost of dollar_figure hereinafter we shall refer to the cottage and the adjacent lot as south fitch on date decedent transferred to ms friedeberg an undivided one-half joint_tenancy interest in south fitch the parties agree that the fair_market_value of south fitch on the date of decedent's death was dollar_figure from until his death decedent owned a 10-unit apartment building located pincite acadia street acadia san francisco california the original purchase_price of acadia was dollar_figure as a result of his divorce from ms fratini decedent ended up with an undivided 10-percent interest in acadia on 2it is unclear whether incident to her divorce ms fratini deeded her one-half interest in south fitch to decedent prior to decedent's transferring a one-half joint_tenancy in south fitch to ms friedeberg because the parties agree on the fair_market_value of the south fitch property we need not address this issue_date decedent transferred to ms friedeberg an undivided one-half joint_tenancy interest in his 10-percent undivided_interest in acadia the fair_market_value of the percent undivided_interest in acadia on the date of decedent's death was dollar_figure prior to and during the time ms friedeberg lived with decedent she received various payments from the german government beginning in ms friedeberg received payments under a german restitution law as a result of her internment in a german concentration camp from to ms friedeberg received a total of dollar_figure in restitution payments beginning in and through the date of decedent's death ms friedeberg also received monthly payments from the german government totaling approximately dollar_figure after decedent and ms friedeberg began living together ms friedeberg received several other_amounts on date pursuant to a marital settlement agreement ms friedeberg received dollar_figure on date ms friedeberg received a distribution in the amount of dollar_figure from the estate of lucian lubinski on or about date ms friedeberg received dollar_figure as a preliminary distribution from the estate of hirtha gray ms friedeberg also received a final payment on or about date from the estate of hirtha gray in the amount of dollar_figure decedent and ms friedeberg jointly obtained interests in several other properties after they began living together on date decedent and ms friedeberg acquired property located pincite chenery street chenery san francisco california as joint_tenants the total downpayment for chenery of dollar_figure consisted of dollar_figure cash and a check dated date for dollar_figure the cash and the check funds were drawn from a checking account held at california federal savings bank which account was in the joint names of decedent and ms friedeberg the parties agree that the fair_market_value of chenery as of the date of decedent's death was dollar_figure on date decedent and ms friedeberg acquired property located pincite dolores street dolores san francisco california as joint_tenants the purchase_price of dolores was dollar_figure the escrow closing statement for the purchase of dolores shows that a downpayment of dollar_figure was made in the form of a deposit and the closing statement names both decedent and ms friedeberg as the parties making the downpayment on date as part of the purchase transaction decedent and ms friedeberg assumed a previous loan from american savings and loan association in the amount of dollar_figure payable to the previous owners of the property decedent and ms friedeberg also signed a note secured_by a deed_of_trust in the amount of dollar_figure payable to the previous owners the parties agree that the fair_market_value of dolores as of the date of decedent's death was dollar_figure as of date there was a mortgage loan balance from american savings on the dolores property of dollar_figure on date decedent and ms friedeberg acquired property located pincite onondaga street san francisco california as joint_tenants for dollar_figure a downpayment of dollar_figure was made as part of the onondaga purchase transaction part of the downpayment consisted of a dollar_figure check signed by ms friedeberg dated date drawn from an account held at bank of america the remainder of the downpayment was paid with two checks drawn upon a joint account in the names of decedent and ms friedeberg with continental savings and loan dated february and date as part of the purchase transaction decedent and ms friedeberg signed a promissory note for dollar_figure payable to the world savings and loan association as lender the parties agree that the fair_market_value of onondaga as of the date of decedent's death was dollar_figure in addition to land and buildings decedent and ms friedeberg maintained joint bank accounts and purchased a number of certificates of deposit with funds drawn from those accounts on date ms friedeberg closed her personal saving sec_3it is not clear whether the account from which the dollar_figure was drawn was a joint account decedent's name appears at the top of the check and ms friedeberg signed the check account with bank of america by withdrawing the balance of dollar_figure on the same day a withdrawal of dollar_figure was made from decedent's and ms friedeberg's joint savings account with bank of america and a dollar_figure certificate of deposit cd was purchased in the joint names of decedent and ms friedeberg approximately months later on date decedent and ms friedeberg jointly purchased a cd for dollar_figure to mature on or about date on date a withdrawal of dollar_figure was made from decedent's and ms friedeberg's joint savings account with bank of america on the same date decedent and ms friedeberg jointly purchased a cd in the amount of dollar_figure to mature on or about date on date a dollar_figure withdrawal was made from decedent's and ms friedeberg's joint savings account with bank of america on the same date decedent and ms friedeberg jointly purchased a cd in the amount of dollar_figure to mature on date in addition to the foregoing cd's decedent and ms friedeberg jointly owned a number of other cd's which were purchased with either funds received from existing cd's that matured or funds from other sources on or about date a fire occurred at the dolores property decedent and ms friedeberg received a total of dollar_figure pursuant to a property claim agreement with state farm fire and casualty co the funds from the fire insurance settlement were deposited on date into a joint savings account held at continental bank in decedent's and ms friedeberg's names the continental account was closed on date and the closing balance was dollar_figure the funds from the continental account were invested and reinvested in several cd's in the joint names of decedent and ms friedeberg held at southern california savings gibraltar savings and california federal bank on date decedent and ms friedeberg opened a joint cd at california federal bank the balance of this cd as of the date of decedent's death was dollar_figure decedent and ms friedeberg also had a balance of dollar_figure in a joint checking account held with bank of america a second joint checking account was also held at bank of america which had a balance of dollar_figure as of the date of decedent's death decedent and ms friedeberg also had a joint savings account with bank of america with a balance of dollar_figure as of decedent's date of death in and decedent reported on his individual federal_income_tax return rental income and loss from the valencia chenery dolores onondaga and south fitch properties ms friedeberg did not report rental income or loss on her federal_income_tax returns for and for the years through decedent and ms friedeberg both reported income and loss from the rental properties for the years through ms friedeberg reported taxable interest_income of dollar_figure with respect to the dollar_figure of interest_income reported approximately dollar_figure was earned from accounts titled in ms friedeberg's name alone form_706 united_states estate and generation-skipping_transfer_tax return was timely filed for decedent's_estate on date on schedule e part of the form_706 items of property which decedent held in joint_tenancy with ms friedeberg were reported with respect to the items decedent's_estate reported contribution credits under sec_2040 and fractional interest discounts on certain of the items the following table sets forth the amounts reflected on schedule e jointly owned property of form_706 with respect to the value of the interests reported upon the date of death before the sec_2040 credit percentage of property included after taking sec_2040 contribution credits value after taking sec_2040 contribution credits fractional interest discounts claimed and values included in decedent's gross_estate after fractional discounts taken by decedent's_estate 4although these amounts were not directly listed on schedule e the amounts were calculated and added to the table as a mathematical computation using the value on the return divided by the fractional discount and divided by the sec_2040 contribution credit rate sec_2040 percent included per form_706 form_706 value before fractional discount form_706 fractional_interest_discount percentage claimed form_706 returned value value of fee simple interest no description checking acct dollar_figure dollar_figure dollar_figure -- dollar_figure savings acct checking acct big_number big_number dollar_figure dollar_figure big_number big_number big_number dollar_figure big_number -- -- -- big_number big_number big_number cd laidley valencia big_number dollar_figure big_number big_number big_number dollar_figure big_number big_number south fitch big_number dollar_figure big_number big_number chenery dolores onondaga acadia big_number dollar_figure big_number big_number big_number dollar_figure big_number big_number big_number dollar_figure big_number big_number big_number dollar_figure big_number big_number in the notice_of_deficiency respondent determined that decedent's_estate was not entitled to claim any credit pursuant to sec_2040 or fractional interest discounts in any amount on the parcels of real_property described as item sec_5 through on schedule e of form_706 on form_706 schedule k debts of the decedent and mortgages and liens decedent's_estate claimed deductions for among other things a portion of the mortgages related to the dolores and onondaga properties on schedule k decedent's_estate allocated the mortgages on the properties in amounts equal to the sec_2040 inclusion percentages for the respective pieces of property the following table contains amounts related to the deductions for mortgages on the dolores and onondaga properties which amounts were reported on schedule k mortgage loan percent claimed item no description balance included balance dolores dollar_figure dollar_figure dollar_figure onondaga big_number dollar_figure big_number in the notice_of_deficiency respondent determined that decedent's_estate was entitled to deduct one-half of the date-of- death balances of the mortgages related to the dolores and onondaga properties opinion sec_2040 contribution credits we must first decide whether the estate is entitled to contribution credits pursuant to sec_2040 regarding the value of the real properties bank accounts and certificates of deposit that were held in the joint names of decedent and ms friedeberg on the date of decedent's death in the notice_of_deficiency respondent denied the sec_2040 contribution credits claimed by decedent's_estate and required the estate to include percent of the fair_market_value of the assets held in joint_tenancy with ms friedeberg petitioner5 argues that ms friedeberg contributed money and money's worth in services with respect to properties owned as joint_tenants by decedent and ms friedeberg petitioner argues that these contributions of money_or_money's_worth in services constitute adequate_consideration for ms friedeberg's ownership_interest in each of the contested assets petitioner ultimately argues that due to ms friedeberg's alleged ownership_interest the estate is entitled to contribution credits under sec_2040 for percent of the value of each of the contested assets respondent argues that decedent's_estate has failed to prove by a tracing of funds or otherwise that ms friedeberg contributed her separate_property or services for her interests in the jointly owned assets entitling the estate to credits under sec_2040 sec_2040 governs the value of jointly owned property to be included in a decedent's_estate sec_2040 provides in pertinent part a general_rule --the value of the gross_estate shall include the value of all property to the extent of the interest therein held as joint_tenants with right_of_survivorship by the decedent and any other person or as tenants_by_the_entirety by decedent and spouse or deposited with any person carrying on the 5throughout this opinion we shall refer to both decedent's_estate and ms friedeberg in her capacity as personal representative of the estate as petitioner banking business in their joint names and payable to either or the survivor except such part thereof as may be shown to have originally belonged to such other person and never to have been received or acquired by the latter from decedent for less than an adequate_and_full_consideration in money_or_money's_worth sec_2040 establishes a contribution test whereby the estate of the deceased joint tenant must generally include the value of the entire property less the portion of the property attributable to the consideration furnished by the surviving joint tenant 110_tc_140 if part of the consideration is found to have been contributed in money_or_money's_worth by the surviving joint tenant then the part of the value of the property that is proportionate to such consideration is not included in decedent's gross_estate estate of anderson v commissioner tcmemo_1989_643 sec a estate_tax regs petitioner first argues that ms friedeberg contributed consideration in the form of money to the value of the assets 6in subsec b of sec_2040 was added to the code by sec_2002 of the tax reform act of publaw_94_455 90_stat_1520 the amendment created a special rule where the joint_tenants were husband and wife 110_tc_140 if the interest were a qualified_joint_interest only one-half of the value of the property owned in joint_tenancy was includable in decedent's gross_estate without regard to which spouse furnished the consideration to acquire the jointly held property id decedent and ms friedeberg were never married therefore sec_2040 does not operate to affect the amount includable in decedent's_estate in decedent's_estate petitioner argues that ms friedeberg contributed her separate funds to jointly held bank accounts and thereafter decedent and ms friedeberg invested in various money market securities and real properties in which they sought to maximize income and acquire additional real_property sec_2040 creates a rebuttable_presumption that the value of the entire property is includable in the deceased joint tenant's estate and the burden of showing original ownership or contribution to the purchase_price by the surviving joint tenant falls upon the estate hahn v commissioner supra pincite 8_tc_969 affd per curiam 170_f2d_1021 9th cir sec_20_2040-1 estate_tax regs where evidence indicates that the surviving joint tenant did contribute money_or_money's_worth under sec_2040 courts have held that the executor's burden has been met notwithstanding that the exact amount of the contribution could not be proven by the taxpayer estate of carpousis v commissioner tcmemo_1974_258 estate of selecman v commissioner a memorandum opinion of this court dated date in those circumstances we have applied the rule enunciated in 39_f2d_540 2d cir and allowed taxpayers to approximate where amounts were not definitely determinable see eg estate of carpousis v commissioner supra estate of selecman v commissioner supra with respect to amounts that ms friedeberg received after date the point at which ms friedeberg and decedent began living together ms friedeberg claims that she received total monthly restitution payments of dollar_figure from the german government ms friedeberg also received dollar_figure in date as a result of her divorce ms friedeberg received a distribution from the estate of lucian lubinski of dollar_figure on date on date and date ms friedeberg received dollar_figure and dollar_figure respectively from the estate of hirtha gray from the above-listed amounts ms friedeberg contributed dollar_figure to the purchase of a jointly owned cd in july of in or around october of ms friedeberg purchased a cd in the amount of dollar_figure in her name with the money she received as restitution payments from the german government upon maturity of the dollar_figure cd ms friedeberg testified that the proceeds were ultimately contributed to the purchase of a cd in the joint names of decedent and ms friedeberg ms friedeberg testified that during she contributed the dollar_figure she received from the estate of lucian lubinski toward the purchase of a cd in the amount of dollar_figure in the joint names of herself and decedent as evidence ms friedeberg offered a number of items in support of her testimony ms friedeberg offered summary schedules showing that she received from the german government a total of dollar_figure7 from date to date the date of decedent's death ms friedeberg also offered bank statements dated in early which indicate that she owned a cd in the amount of dollar_figure ms friedeberg offered numerous bank statements that indicated that cd's were later purchased in the joint names of decedent and herself in amounts corresponding to the amounts ms friedeberg testified that she and decedent purchased ms friedeberg offered probate documents from the superior court of san francisco county california dated date indicating that she received a distribution of 7the summary schedule shows the following payments year amount dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure total dollar_figure dollar_figure from the estate of lucian lubinski with respect to the jointly acquired real properties ms friedeberg testified that the downpayments for chenery dolores and onondaga were all paid with funds from bank accounts held in the joint names of decedent and ms friedeberg the downpayments for the chenery dolores and onondaga properties were in the amounts of dollar_figure dollar_figure and dollar_figure respectively and totaled dollar_figure the purchases of chenery dolores and onondaga were all completed during the years through from to ms friedeberg has shown that she received at least dollar_figure one-half of the total downpayments for the properties would require a contribution of dollar_figure we find ms friedeberg to be a credible witness and we accept the veracity of her testimony thus notwithstanding the fact that ms friedeberg was unable to provide every receipt for each bank deposit purchase of a cd and receipts for each reinvestment into another cd it is reasonable to conclude that she contributed one-half toward the total purchase prices of the chenery dolores and onondaga properties cohan v commissioner supra 8this amount includes dollar_figure from ms friedeberg's divorce a dollar_figure contribution dollar_figure from the cd purchased with german restitution funds dollar_figure from the estate of lucian lubinski and dollar_figure from the estate of hirtha gray 9one-half of dollar_figure equals dollar_figure petitioner also argues that ms friedeberg provided services in the form of management of the rental properties from until petitioner argues that these services constitute adequate_consideration contributed in money's worth to the values of the laidley valencia south fitch and acadia properties such that petitioner is entitled to exclude one-half of the total value of these properties from decedent's_estate under sec_2040 respondent asserts that the services ms friedeberg performed were minimal and that petitioner has not established a value for ms friedeberg's services our determination of whether ms friedeberg provided full and adequate_consideration is necessarily one of fact see estate of heidt v commissioner t c pincite estate of anderson v commissioner tcmemo_1989_643 in determining the consideration furnished by the surviving joint tenant amounts furnished by decedent to the surviving joint tenant for less than full and adequate_consideration are to be ignored estate of anderson v commissioner supra sec_20_2040-1 estate_tax regs if part of the consideration is found to have been contributed by the surviving joint tenant then the part of the value of the property as is proportionate to such consideration is not included in decedent's gross_estate sec_20_2040-1 estate_tax regs in the instant case ms friedeberg testified that for a number of years she managed the rental properties in support of ms friedeberg's testimony petitioner offered a number of check registers indicating that ms friedeberg regularly kept the financial records regarding income and expenses related to the rental properties ms friedeberg submitted a substantial number of documents regarding the rental properties from sellers insurance_companies mortgage banks tenants and title companies addressed to both decedent and ms friedeberg ms friedeberg submitted many letters from tenants of the rental properties addressed to her alone she had signature_authority over the joint accounts and regularly wrote checks and paid expenses related to the rental properties ms friedeberg maintained the buildings on the rental properties by providing janitorial services and maintaining the landscape we find that ms friedeberg did provide various services including management of the properties maintenance and janitorial services petitioner introduced mr paul chahin as an expert witness and offered his expert report for the purpose of proving the fair_market_value of the real_estate management and other services provided by ms friedeberg in his report mr chahin indicated that his valuation was based on an understanding that ms friedeberg managed the valencia property and the properties which decedent and ms friedeberg jointly acquired mr chahin indicated in his report that based on his experience as a property manager the property management leasing janitorial and maintenance services performed by ms friedeberg had an average fair_market_value of dollar_figure per year mr chahin's report did not distinguish between the amount of services provided for each of the different properties based on the number of rental units in each building or otherwise mr chahin's report did not distinguish a difference in value over the course of years notwithstanding the fact that more units were acquired over time the report simply states that the fees charged in general have remained relatively constant in california since the early 1980's also it is unclear from mr chahin's report which properties the valuation is based on mr chahin's report does not appear to address the laidley south fitch or acadia properties because the value assigned by mr chahin is arrived at in a conclusory fashion without taking into account the changes in the amount of services or the value of the services over time mr chahin's report does not persuade us that the value of ms friedeberg's services was dollar_figure per year and we are not bound by it 86_tc_547 even assuming that we accepted a value of dollar_figure per year petitioner has not offered evidence as to which among the various rental properties the value should be allocated or in what proportion as stated previously ms friedeberg did credibly testify that she provided regular and substantial services in respect to the rental properties including valencia and south fitch on form_706 petitioner reported sec_2040 contribution credits related to valencia and south fitch of dollar_figure percent and dollar_figure percent respectively because petitioner has not provided us with sufficient evidence in order to make a specific allocation of ms friedeberg's services amongst the properties to which the services relate we find the percentages listed on the initial form_706 to be probative in making a reasonable allocation of the value of ms friedeberg's services using our best judgment under these circumstances we hold that petitioner is entitled to sec_2040 contribution credits for valencia and south fitch of dollar_figure percent and dollar_figure percent respectively cohan v commissioner supra however petitioner has not offered any evidence which would persuade us that ms friedeberg performed substantial services in connection with the laidley or acadia properties petitioner reported no contribution credits on form_706 for the laidley and acadia properties although ms friedeberg testified that she regularly cleaned laidley she also resided in laidley with decedent for all the years in which she and decedent lived together laidley was never used as a rental property also decedent did not receive any rental income from acadia subsequent to his divorce from ms fratini therefore based on petitioner's initial allocation on form_706 of percent of the value of both laidley and acadia and because petitioner did not provide us with sufficient evidence in order to allocate any of ms friedeberg's services to either the laidley or acadia properties we find that petitioner has failed to carry the burden of proving that adequate_consideration in money's worth was contributed by ms friedeberg to the joint_interests in the laidley or acadia properties sec_2040 rule a 290_us_111 with respect to the remaining assets petitioner argues that the estate is entitled to deduct one-half of the date-of-death value of two checking accounts containing dollar_figure a savings account containing dollar_figure and a cd valued at dollar_figure generally income produced by property belongs to the person who owns the property at the time the property produces such income and does not originate with a donor who has made a completed_gift of that property prior to the production of such income 185_f2d_463 7th cir see also 9_tc_1192 sec_20_2040-1 estate_tax regs where a surviving joint tenant receives property gratuitously from a 10the first checking account contained dollar_figure and the second checking account contained dollar_figure decedent the property thereafter produces income and the income is used as consideration for the acquisition of the jointly held property the income from the time of receipt of the gift has been held to be the surviving joint tenant's income 70_tc_1077 affd without published opinion 673_f2d_1310 4th cir see also harvey v united_states supra estate of howard v commissioner supra as we previously stated the dolores chenery and onondaga properties were jointly purchased and owned equally by decedent and ms friedeberg on or about date decedent transferred an undivided one-half joint_tenancy interest in each of the remaining properties including laidley valencia south fitch and acadia to ms friedeberg from through decedent and ms friedeberg reported dollar_figure11 of net rental income from all the jointly held properties ms friedeberg testified that amounts received through rental of the properties were equally shared and deposited in the 11net profits from rentals were reported as follows year amount dollar_figure dollar_figure dollar_figure dollar_figure total dollar_figure jointly owned bank accounts and were used regularly to purchase cd's for the time period after date decedent and ms friedeberg as joint owners of the properties equally shared the net rentals again we accept the veracity of ms friedeberg's testimony and find that the rental income received and deposited into joint accounts constitutes sufficient consideration such that ms friedeberg acquired a 50-percent ownership_interest in the bank accounts and cd deposits as of the date of decedent's death therefore we hold that petitioner is due a contribution credit pursuant to sec_2040 equal to percent of the joint bank account holdings in the savings checking and cd accounts fractional interest discounts in determining the amount included in decedent's_estate pursuant to sec_2040 petitioner reduced the value of decedent's interest in several of the jointly held real properties by fractional interest discounts petitioner argues that the reported discounted fair market values of the joint_tenancy interests in laidley valencia south fitch chenery dolores and onondaga are valid in the notice_of_deficiency respondent disallowed the claimed fractional discounts in our recent opinion in 110_tc_297 we addressed the issue of whether and to what extent a fractional_interest_discount or lack of marketability discount should be applied to a decedent's property held in joint_tenancy with right_of_survivorship in estate of young v commissioner supra pincite we stated under the scheme of sec_2040 the amount includable in a decedent's gross_estate does not depend on a valuation of property rights actually transferred at death or on a valuation of the actual interest held by the decedent legal_title instead decedent's gross_estate includes the entire value of property held in a joint_tenancy by him and any other person except to the extent the consideration for the property was furnished by such other person sec_2040 provides an artificial inclusion of the joint_tenancy property the entire value of the property less any contribution by the surviving joint tenant except for the statutory exclusions in sec_2040 there is no further allowance to account for the fact that less than the entire_interest is being included citation and fn ref omitted applying the same reasoning to the instant case we conclude that petitioner is not entitled to fractional interest discounts on any of the properties based on joint_ownership with ms friedeberg sec_2053 deductions for unpaid mortgages on schedule k of form_706 petitioner claimed deductions related to mortgages on the dolores and onondaga properties of dollar_figure and dollar_figure respectively petitioner allocated the mortgages on the properties in amounts equal to the sec_2040 inclusion percentages of dollar_figure for the dolores property and dollar_figure for the onondaga property in the notice_of_deficiency respondent limited the deductions to percent of each of the outstanding mortgages sec_2053 generally provides that a deduction is allowable for the amount of unpaid mortgage on property where the value of decedent's interest therein is included in the value of the gross_estate sec_20_2053-7 estate_tax regs provides that a deduction is allowed if the value of the property undiminished by the amount of the mortgage or indebtedness is included in the value of the gross_estate generally in the case of joint_tenancy real_property the amount deductible from a decedent's_estate is limited to the portion of the mortgage which the estate is obligated to pay 30_f2d_792 9th cir affg 7_bta_134 both decedent and ms friedeberg signed the note and deed_of_trust securing the note for the dolores property similarly both decedent and ms friedeberg signed the promissory note as part of the purchase of the onondaga property petitioner does not argue that under california law the estate is ultimately obligated to pay more than one-half of the outstanding date-of- death mortgage balances upon the dolores and onondaga properties therefore we sustain respondent's determination that petitioner is entitled to deduct percent of the date-of-death balances of the mortgages related to the dolores and onondaga properties parrott v commissioner supra decision will be entered under rule