NOT PRECEDENITAL

                    UNITED STATES COURT OF APPEALS
                         FOR THE THIRD CIRCUIT
                              _____________

                                  No. 13-1672
                                 _____________

                           EDWARD R. ZAMPELLA,

                                                     Appellant

                                          v.

                  COMMISSIONER OF INTERNAL REVENUE



                           On Appeal from the Record of
                            the United States Tax Court
                         (Tax Court Docket No.: 11-2488)
                   Trial Judge: Honorable Robert N. Armen, Jr.


                            Argued on March 5, 2014

           Before: RENDELL, SMITH and HARDIMAN, Circuit Judges

                          (Opinion filed: April 4, 2014)



Frank Agostino, Esquire
Lawrence M. Brody, Esquire (Argued)
Agostino & Associates
14 Washington Place
The Bank House
Hackensack, NJ 07601

                  Counsel for Appellant
Gary R. Allen, Esquire
Robert J. Branman, I, Esquire (Argued)
Richard Farber, Esquire
Kenneth R. Rosenberg, Esquire
United States Department of Justice
Tax Division
950 Pennsylvania Avenue, N.W.
P. O. Box 502
Washington, D.C. 20044

                        Counsel for Appellee



                                         OPINION


RENDELL, Circuit Judge:

         Edward Zampella appeals from the Tax Court’s decision sustaining the

determination of the Commissioner of Internal Revenue that denied him the first-time

homebuyer credit on his 2008 tax return. The Commissioner found that Edward’s

acquisition of property did not meet the definition of “purchase” under 26 U.S.C §

36(c)(3)(A)(i) because he acquired the property from a “related person”, and thus, is not

entitled to the tax credit. The Tax Court agreed. For the reasons set forth below, we will

affirm the decision of the Tax Court.

                                         I. Background

                                    a. Factual Background1

         Maria Lee Zampella died on September 24, 2008. She left her entire estate to her

two sons, Edward and Arthur Zampella, “to be divided equally, share and share alike.”

1
    As noted by the Tax Court, the parties stipulated as to these facts.
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(A. 49.) Her Estate included a home located at 28 Schelly Drive, Middletown, NJ (“the

Property”). She also appointed her two sons as co-executors and beneficiaries of her

Estate.

          Immediately following Maria Zampella’s death, her Estate had the Property

appraised at a value of $430,000. Edward desired to own the Property and issued four

checks totaling $215,000 payable to Arthur Zapolski. All of the checks were deposited

into the trust account of Zapolski, identified as the “Settlement Agent.” (A. 56.) Arthur

Zampella was then issued a check in the amount of $215,000 from the trust account and a

Deed for the Property was issued to Edward.

          The Deed lists the Grantor as “Edward R. Zampella and Arthur F. Zampella

individually and as Co-Executors of the Estate of Maria Lee Zampella,” and the Grantee

as “Edward R. Zampella.” (A. 50-51.) Additionally, a HUD-1 Settlement Statement was

executed, which identified the seller as “Edward R. Zampella and Arthur F. Zampella as

Co-Executors and beneficiaries of the Estate of Maria Lee Zampella,” and the borrower

as “Edward R. Zampella.” (A. 56.)

          Following this transaction, Edward claimed the first-time homebuyer’s credit

(“FTBHC”) of $8,000 on his 2008 tax return.2 On January 26, 2011, the Commissioner

of Internal Revenue (hereinafter “IRS”) sent Edward a notice of deficiency on account of

his ineligibility for the FTHBC. Following receipt of the notice, Edward filed for

redetermination with the Tax Court.


2
  26 U.S.C. § 36(g) permits a taxpayer who makes a qualifying purchase in 2009 to treat
the purchase as if it were made on December 31, 2008.
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                                    b. Tax Court Opinion

         The Tax Court began its analysis by explaining the parameters of the FTHBC in

26 U.S.C. § 36, which allows up to an $8,000 credit to be claimed against an individual’s

Federal income tax. To be eligible an individual must qualify as a first-time homebuyer

who “purchased” a principal residence between April 9, 2008 and May 1, 2010.

         Elaborating on the FTHBC guidelines, the Tax Court noted the following:

         Section 36(c)(3)(A)(i) defines ‘purchase’ for purposes of the
         FTHBC as ‘any acquisition, but only if * * * the property is not
         acquired from a person related to the person acquiring such
         property.’ Siblings are excluded from the definition of related
         persons for FTHBC purposes. [26 U.S.C. §§] 36(c)(5), 267(b)(1),
         (c)(4). However, under section 36(c)(5), related persons generally
         include an executor of an estate and a beneficiary of such estate.
         Sec. 267(b)(13).

(A10.)

         Edward urged that he had acquired the Property from his brother, i.e. a sibling,

who is not a related person. However, the Tax Court agreed with the IRS’s position that

Edward had acquired the residence from a related person, namely, the executors of the

Estate, under 26 U.S.C. § 36(c)(5), which disqualified him from receiving the FTHBC.

The Tax Court relied upon the Deed listing Edward and Arthur as “Grantor” in their

representative capacities as co-executors. Similarly, the Tax Court noted that they were

identified in the HUD-1 Settlement Statement under “Seller” as co-executors and both

signed as “Seller”.

         The Tax Court considered that Edward “urges us to treat his acquisition of the

residence as a bifurcated transaction such that he acquired only a one-half interest” from


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the Estate and the other “one-half interest from his brother directly.” (A11.) The Tax

Court refused to do so, writing that “the record indicates that petitioner acquired the

residence from an executor of the Estate and the substance of the transaction accords with

its form.” (Id.)

                         II. Jurisdiction and Standard of Review

       The Tax Court had jurisdiction pursuant to 26 U.S.C. §§ 7442, 6214(a). We have

jurisdiction pursuant to 26 U.S.C. § 7482(a). We review de novo the legal conclusions of

the Tax Court, while reviewing its factual findings for clear error. ACM Partnership v.

Commissioner, 

, 245 (3d Cir. 1998).

                                      III. Discussion

       As stated by the Tax Court, 26 U.S.C. § 36 allows a first-time homebuyer to claim

the FTHBC on the individual’s Federal income tax. The FTHBC can be equal to 10

percent of the “purchase price” of the residence, but cannot exceed $8,000. 26 U.S.C. §

36(a), (b)(1)(A). “First-time homebuyer” is “any individual [who] had no present

ownership interest in the principal residence during the 3-year period ending on the date

of the purchase”. 

“Purchase price” is defined as “the adjusted basis of the

principal residence on the date such residence is purchased.” 

Most

importantly, “purchase” is defined as “any acquisition, but only if-- (i) the property is not

acquired from a related person, and (ii) the basis of the property in the hands of the

person acquiring such property is not determined . . . under section 1014(a) (relating to

property acquired from a decedent).” 

(ii)(II). The definition of



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“related persons” in the statute exempts siblings, but includes “an executor of an estate

and a beneficiary of such estate.” 26 U.S.C. §§ 36(c)(5), 267(b)(13).

       Edward argues the Tax Court erred by not applying New Jersey law to this

transaction. Relying primarily on the case of Matter of Will of Gardner, Edward argues

that upon his mother’s death, actual ownership of one-half interest in the Property passed

to him and one-half interest passed to his brother. 

(N.J. Super. Ct. App.

Div. 1987) (“It is clear that title to real estate vests in a devisee upon the testator’s death

even before admission of the will to probate.” (internal quotations omitted)). Thus, he

urges, “[t]he Estate could not have sold the property to [him], because [his] brother”

already owned the half-interest Edward later purchased from him. Appellant’s Br. at 9.

However, as Appellee points out, Gardner—along with the other cases Edward cites—

relates to a vesting of an interest in property, not ownership.3 Indeed, in Gardner, the

issue was whether a third party, who had acquired the rights in a property from a devisee

to a contested will, could intervene in the court action resolving the matter. The Court

determined that intervention should have been allowed because the third party had more

than an expectancy interest. 

. Consequently, we do not view

Gardner as standing for the proposition that title passed to Edward and his brother

immediately upon the death of their mother.



3
  We note that Edward relies on other cases to support his contention. See I.E.’s L.L.C. v.
Simmons, 

, 489 (N.J. Super. Ct. Law. Div. 2006) (‘Title to real estate vests
in heirs immediately upon the testator’s death, even before the will is probated.)”). After
review, we find no authority that establishes anything other than a vested interest in a
beneficiary or devisee upon the death of a testator, rather than actual ownership.
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       We conclude that the Tax Court correctly determined that Edward Zampella

acquired the Property from the executors of his mother’s Estate. The documentation

attendant to the transfer accords with this determination. Edward was listed, along with

his brother, in his representative capacity as a co-executor, as “Grantor” on the Deed and

“Seller” on the HUD-1 Settlement Statement. (A. 50-51, 56.) In addition, Edward was

listed individually as “Grantee” on the Deed and “Borrower” on the HUD-1 Settlement

Statement. (Id.)

       Edward also urges that we should look to the substance of the transaction, not its

form. See Frank Lyon Co. v. United States, 

, 573 (1978) (“In applying this

doctrine of substance over form, the Court has looked to the objective economic realities

of the transaction rather than to the particular form the parties employed.”); see also

Rumsfeld v. United Technologies Corp., 

, 1376 (D.C. Cir. 2003) (“[W]hile

the taxpayer is bound by the form of the transaction that it has selected, the taxpayer’s

use of a particular form will not prevent the government from looking to its substance.”).

However, aside from the fact that Edward paid one-half the value of the property, rather

than the entire value, the substance of the transaction was that Edward acquired the

Property from the Estate. The Deed was executed with both executors as Grantor and the

money was exchanged in accordance with the HUD-1 Settlement Statement listing

Arthur Zapolski as “Settlement Agent.” We see no basis for disturbing the findings of

the Tax Court.

       In sum, Edward does not qualify as a first-time homebuyer because the

documentation substantiates the Tax Court’s findings that he acquired the Property from

                                             7
his mother’s Estate. Accordingly, Edward did not purchase the Property within the

meaning of 26 U.S.C. § 36(c) and thus, cannot claim the FTHBC.

                                    VI. Conclusion

      For the foregoing reasons, we will affirm the ruling of the Tax Court.




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