Appeal from a decision of the Tax Court, 72 T.C. No. 68 (1979), Bruce M. Forrester, Judge, insofar as the decision held that the taxpayer realized taxable gain upon what was claimed to be a gift of real estate which was encumbered by non-recourse mortgages exceeding taxpayer's adjusted basis. Affirmed.
Before Friendly, Kaufman and Timbers, Circuit Judges.
The estate of Aaron Levine and his widow Anna*fn1 appeal from a part of a decision of the Tax Court, 72 T.C. No. 68 (1979), which found a deficiency of $130,428.42 in Aaron Levine's 1970 income tax. The deficiency resulted from a determination by the Commissioner that the taxpayer had realized gain upon his gift, on January 1, 1970, of income producing property consisting of land and a building at 20-24 Vesey Street in New York City (the property) to a previously created trust for the benefit of three grandchildren.
The property was originally purchased on November 1, 1944, by a corporation wholly owned by Levine. On August 22, 1957, the corporation, which was in the course of dissolution, made a liquidating distribution of the property to the taxpayer. Thereafter Levine obtained two non-recourse mortgages secured by the property. One of these, for $500,000, was obtained on March 17, 1966, from the Bowery Savings Bank and represented the consolidation of numerous earlier mortgages.*fn2 The other, for $300,000, was obtained from the Commercial Trading Company on November 21, 1968; this was later amortized to $280,000.
Levine filed a gift tax return for 1970 reporting the transaction as follows:
20-24 Vesey Street, City, County and State of New
York -- Appraisal value $925,000.00
Bowery Savings Bank $500,000.00
12/1/69 to 12/31/69 2,291.67
Commercial Trading*fn* 280,000.00
12/1/69 to 12/31/69 3,616.67
Expenses incurred by donor in 1969 and assumed and paid by donee :