95 T.C. 74">*79 The partnership provisions concerning judicial review, sections 6226-6228, are applicable to S corporations. S. Rept. 97-640, at 25 (1982), 1982-2 C.B. 718, 729. Section 6226(f) provides:

SEC. 6226(f). Scope of Judicial Review. -- A court with which a petition is filed in accordance with this section shall have jurisdiction to determine all partnership items of the1990 U.S. Tax Ct. LEXIS 69">*77 partnership for the partnership taxable year to which the notice of final partnership administrative adjustment relates and the proper allocation of such items among the partners.

Accordingly, the proper allocation of subchapter S items among the shareholders would be within our jurisdiction in an S corporation proceeding.

On January 27, 1987, the Secretary issued temporary regulations ² defining "subchapter S items." The regulations are effective for "taxable years beginning after December 31, 1982." Sec. 301.6245-1T(e), Temporary Proced. & Admin. Regs., 52 Fed. Reg. 3004 (Jan. 30, 1987). The regulations define "subchapter S items," in part, as follows:

Sec. 301.6245-1T. Subchapter S items (Temporary). -- (a) In general. For purposes of subtitle F of the Internal Revenue Code of 1986, the following items which are required1990 U.S. Tax Ct. LEXIS 69">*78 to be taken into account for the taxable year of an S corporation under subtitle A of the Code are more appropriately determined at the corporate level than at the shareholder level, and, therefore, are subchapter S items:

(1) The S corporation aggregate and each shareholder's share of, and any factor necessary to determine, each of the following:

(i) Items of income, gain, loss, deduction, or credit of the corporation;

* * * *

(5) Items relating to the following transactions, to the extent that a determination of such items can be made from determinations that the corporation is required to make with respect to an amount, the character of an amount, or the percentage of stock ownership of a shareholder in the corporation, for purposes of the corporation's books and records or for purposes of furnishing information to a shareholder:

(i) Contributions to the corporation; and

(ii) Distributions from the corporation.

Respondent contends that because he is attempting to reallocate income of Davidan, the proposed reallocation is 95 T.C. 74">*80 within the scope of review in an S corporation proceeding. Each shareholder's share of items of income of an S corporation is a subchapter S item. Sec. 1990 U.S. Tax Ct. LEXIS 69">*79 301.6245-1T(a)(1)(i), Temporary Proced. & Admin. Regs., 52 Fed. Reg. 3003 (Jan. 30, 1987). Under section 6226(f), the proper allocation of subchapter S items among the shareholders would be within our jurisdiction in an S corporation proceeding. However, in the case before us, respondent seeks to reallocate income from shareholders of record of an S corporation to a taxpayer who is not a shareholder of record. Accordingly, the proposed reallocation is not expressly within the scope of section 6226(f). However, respondent contends in his objection to petitioner's motion that William and Deborah Hang are the "true beneficial shareholders" of Davidan. We must decide whether the proposed reallocation of a subchapter S item from record shareholders to a taxpayer who respondent has determined is the beneficial shareholder is within the scope of review provided in section 6226(f).

Whether William Hang is the "true and beneficial shareholder" of Davidan depends on factors that cannot be determined at the corporate level. Although ordinarily shareholder status is determined at the corporate level, as a practical matter, there is no way for a corporation to 1990 U.S. Tax Ct. LEXIS 69">*80 determine who the beneficial owners of its stock are because the information necessary to make the determination would not be available at the corporate level where the beneficial owner of stock is not a shareholder of record. In determining the true ownership of corporate stock, beneficial ownership, as opposed to mere legal title, is decisive. Beirne v. Commissioner, 61 T.C. 268">61 T.C. 268, 61 T.C. 268">277 (1973); Hook v. Commissioner, 58 T.C. 267">58 T.C. 267 (1972); Duarte v. Commissioner, 44 T.C. 193">44 T.C. 193 (1965). Ownership of property for Federal income tax purposes is a question of fact to be determined from all of the facts and circumstances. Schoenberg v. Commissioner, 302 F.2d 416">302 F.2d 416 (8th Cir. 1962), affg. a Memorandum Opinion of this Court; Snyder v. Commissioner, 66 T.C. 785">66 T.C. 785 (1976). In making such determination, "command over property or enjoyment of its economic benefits marks the real owner." Anderson v. Commissioner, 164 F.2d 870">164 F.2d 870, 164 F.2d 870">873 (7th Cir. 1947), cert. denied 334 U.S. 819">334 U.S. 819 (1948); see Speca v. 95 T.C. 74">*81 , 630 F.2d 554">630 F.2d 554, 630 F.2d 554">557 (7th Cir. 1980),1990 U.S. Tax Ct. LEXIS 69">*81 affg. a Memorandum Opinion of this Court. The substance of a transaction, rather than its mere form, is determinative of its tax consequences. Commissioner v. Court Holding Co., 324 U.S. 331">324 U.S. 331 (1945).

In 630 F.2d 554">Speca v. Commissioner, supra, the Seventh Circuit used a four-part test to decide shareholder status in a subchapter S corporation when stock was transferred between family members.

The issue of shareholder status in subchapter S corporations is not a new one. Examination of prior decisions reveals a consistent pattern of analysis involving the use of four specific factors. Those factors include: (1) Are the transferees within the family able to effectively exercise ownership rights of their shares; (2) Did the transferor continue to exercise complete dominion and control over the transferred stock; (3) Did the transferor continue to enjoy economic benefits of ownership after conveyance of the stock; and (4) Did the transferor deal at arm's length with the corporation involved. See Duarte v. Commissioner, 44 T.C. 193">44 T.C. 193 (1965); Beirne v. Commissioner, 52 T.C. 210">52 T.C. 210 (1969);1990 U.S. Tax Ct. LEXIS 69">*82 Beirne v. Commissioner, 61 T.C. 268">61 T.C. 268 (1973); and Kirkpatrick v. Commissioner, 36 T.C.M. 1122">36 T.C.M. 1122 (1971). [Speca v. Commissioner, 630 F.2d 554">630 F.2d at 556.]

The test used by the Seventh Circuit emphasizes what the shareholders or former shareholders did, or what their rights are, and not what happened at the corporate level. Although the instant case does not involve transfers of stock between family members since David and Daniel Hang have always been the only shareholders of record of Davidan, the analysis in this situation would be similar. Whether the income should be reallocated will depend on who controls and enjoys the benefits of the stock. This determination is more appropriately made at the shareholder level than at the corporate level.

Also, if the determination of whether income should be reallocated is made at the corporate level in an S corporation proceeding, the people who are being affected (the alleged beneficial shareholders) cannot be parties until the main issue in the case is decided, namely, who are the beneficial shareholders. Under section 6243, shareholders have the1990 U.S. Tax Ct. LEXIS 69">*83 right to participate in any administrative or judicial proceeding for the determination at the corporate level of any subchapter S item, but no right to participate is given to nonshareholders. Therefore, in order to participate, 95 T.C. 74">*82 an alleged beneficial shareholder would have to concede the issue of whether he is a shareholder. For this reason, the determination of whether income should be reallocated from a shareholder of record to someone who is not a shareholder of record is more appropriately determined at the shareholder level.

The subchapter S corporation audit and litigation procedures and the accompanying legislative history reflect a desire on the part of Congress to have only items that are more appropriately determined at the corporate level determined in subchapter S corporation proceedings. Secs. 6241, 6245; S. Rept. 97-640, at 25 (1982), 1982-2 C.B. 718, 729. Consequently, we find that the proposed reallocation is not the type of reallocation within our scope of review in a subchapter S corporation proceeding under section 6226(f). Accordingly, petitioners' motion to dismiss with respect to the FSAA's for 1984 and 1985 will be granted. 1990 U.S. Tax Ct. LEXIS 69">*84 Petitioners' motion to dismiss having been granted, we need not address the issue of whether Davidan is a small S corporation or petitioners' alternative motion for partial judgment on the pleadings.

To reflect the foregoing,

An appropriate order will be issued.